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Subsidiary research and development, and the local environment

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  • Davis, Lee N.
  • Meyer, Klaus E.
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    Abstract

    Multinational enterprises (MNEs) increasingly seek to optimise their global innovative capabilities by incorporating subsidiary-specific advantages in different countries. But how important are the different location advantages for subsidiary investments in research and development? This paper adds to our understanding of the effects of commonly cited location advantages by analysing the degree to which they actually influence the incidence and level of subsidiary R&D. We developed hypotheses from the existing literature on location advantages, multinational R&D, and innovation incentives, and tested them in relation to an empirical data set containing over 2000 responses from subsidiary managers in seven countries in Europe. Four aspects of the local business environment were investigated: competitive conditions, supply conditions, scientific institutions, and government support. We found that only the presence of scientific institutions has a consistent, positive effect on the incidence and level of subsidiary R&D. Government support has a positive effect on the incidence of subsidiary R&D, but not its level. However, highly competitive environments have a negative effect, at least in small countries.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 13 (2004)
    Issue (Month): 3 (June)
    Pages: 359-382

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    Handle: RePEc:eee:iburev:v:13:y:2004:i:3:p:359-382

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    Related research

    Keywords: International R&D Multinational enterprise Subsidiary R&D Location advantages;

    References

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    Cited by:
    1. Tsang, Eric W.K. & Yip, Paul S.L. & Toh, Mun Heng, 2008. "The impact of R&D on value added for domestic and foreign firms in a newly industrialized economy," International Business Review, Elsevier, vol. 17(4), pages 423-441, August.
    2. Estrin, Saul & Meyer, Klaus E. & Wright, Mike & Foliano, Francesca, 2008. "Export propensity and intensity of subsidiaries in emerging economies," International Business Review, Elsevier, vol. 17(5), pages 574-586, October.
    3. Adenfelt, Maria & Lagerström, Katarina, 2006. "Knowledge development and sharing in multinational corporations: The case of a centre of excellence and a transnational team," International Business Review, Elsevier, vol. 15(4), pages 381-400, August.
    4. Kottaridi, Constantina & Papanastassiou, Marina & Pitelis, Christos, 2009. "Determinants of MNE Subsidiaries Decisions to Set Up Own R&D Laboratories - Theory and Evidence," Papers DYNREG38, Economic and Social Research Institute (ESRI).
    5. Chen, Chung-Jen & Hsiao, Yung-Chang, 2013. "The endogenous role of location choice in product innovations," Journal of World Business, Elsevier, vol. 48(3), pages 360-372.
    6. Lee Davis, 2004. "Intellectual property rights, strategy and policy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(5), pages 399-415.
    7. Persson, Magnus, 2006. "The impact of operational structure, lateral integrative mechanisms and control mechanisms on intra-MNE knowledge transfer," International Business Review, Elsevier, vol. 15(5), pages 547-569, October.
    8. Wang, Chengqi & Kafouros, Mario I., 2009. "What factors determine innovation performance in emerging economies? Evidence from China," International Business Review, Elsevier, vol. 18(6), pages 606-616, December.
    9. Boojihawon, Dev Kumar & Dimitratos, Pavlos & Young, Stephen, 2007. "Characteristics and influences of multinational subsidiary entrepreneurial culture: The case of the advertising sector," International Business Review, Elsevier, vol. 16(5), pages 549-572, October.
    10. Jiang, Crystal X. & Yang, Qin & Li, Sali & Wang, Yong, 2011. "The moderating effect of foreign direct investment intensity on local firms' intangible resources investment and performance implications: A case from China," Journal of International Management, Elsevier, vol. 17(4), pages 291-302.
    11. Qin Yang & Crystal X. Jiang & Sali Li, 2010. "Intangible resources, agglomeration effect of FDI intensity, and firm performance: Evidence from Chinese semiconductor firms," Working Papers 56, globADVANTAGE, Polytechnic Institute of Leiria.
    12. Frédérique Sachwald, 2008. "Location choices within global innovation networks: the case of Europe," The Journal of Technology Transfer, Springer, vol. 33(4), pages 364-378, August.

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