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Strategic R&D Location in European Manufacturing Industries

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Author Info

  • René Belderbos

    ()

  • Elissavet Lykogianni
  • Reinhilde Veugelers

Abstract

We develop and empirically test a model of foreign R&D investments that takes into account strategic interaction in R&D location decisions by multinational firms in the context of R&D spillovers and foreign technology sourcing strategies. In a two-country, two-firm model with cross investments, the optimal share of R&D performed abroad depends on the efficiency of intra-firm international technology transfer, the degree of inter-firm R&D spillovers, the intensity of product market competition, and the importance of the general knowledge pool. The impact of these factors differs markedly between technology leading firms and technology laggards. We find support for most of the predictions of the model in an empirical analysis of patents based on innovations in foreign countries by 131 leading European manufacturing firms in 22 ISIC industries in 1996-1997. For technology leaders, the share of patents originating in other EU countries responds positively to host country product market competition and is strongly increasing in the level of intellectual property rights protection. Foreign R&D by technology laggards is discouraged by host country competition but increases with the efficiency of (reverse) technology transfer. Foreign R&D of both leaders and laggards increases with the size of the local knowledge pool and the size of production operations in the host country.

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File URL: http://hdl.handle.net/10.1007/s10290-008-0143-2
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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 144 (2008)
Issue (Month): 2 (July)
Pages: 183-206

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Handle: RePEc:spr:weltar:v:144:y:2008:i:2:p:183-206

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Related research

Keywords: Multinational firms; R&D; R&D spillovers; FDI;

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References

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  1. Cassiman, Bruno & Pérez-Castrillo, D & Veugelers, Reinhilde, 2000. "Endogeneizing know-how flows through the nature of R&D investments," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/102902, Katholieke Universiteit Leuven.
  2. Wilbur Chung & Juan Alcácer, 2002. "Knowledge Seeking and Location Choice of Foreign Direct Investment in the United States," Management Science, INFORMS, vol. 48(12), pages 1534-1554, December.
  3. Ethier, W.J. & Markusen, J.R., 1993. "Multinational Firms, Technology Diffusion and Trade," ISER Discussion Paper 0303, Institute of Social and Economic Research, Osaka University.
  4. Hans Gersbach & Armin Schmutzler, 2006. "Foreign Direct Investment and R&D offshoring," Working Papers 0606, University of Zurich, Socioeconomic Institute.
  5. Norback, P.-J., 1999. "Multinational Firms, Technology and Location," Research Institute of Industrial Economics Working Papers 512, Research Institute of Industrial Economics (IFN).
  6. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan, vol. 30(1), pages 1-24, March.
  7. Griffith, Rachel & Harrison, Rupert & Van Reenen, John, 2004. "How Special is the Special Relationship? Using the Impact of US R&D Spillovers on UK Firms as a Test of Technology Sourcing," CEPR Discussion Papers 4698, C.E.P.R. Discussion Papers.
  8. Georges SIOTIS, 1996. "Foreign Direct Investment Strategies and Firms' Capabilities," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9626, Université de Lausanne, Faculté des HEC, DEEP.
  9. Bjorvatn, K. & Eckel, C., 2001. "Technology Sourcing and Strategic Foreign Direct Investment," Papers 28/2001, Norwegian School of Economics and Business Administration-.
  10. Belderbos, Rene & Lykogianni, Elissavet & Veugelers, Reinhilde, 2005. "Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing and Competition," CEPR Discussion Papers 5060, C.E.P.R. Discussion Papers.
  11. Kumar, Nagesh, 1996. "Intellectual property protection, market orientation and location of overseas R&D activities by multinational enterprises," World Development, Elsevier, vol. 24(4), pages 673-688, April.
  12. Smarzynska Javorcik, Beata, 2004. "The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies," European Economic Review, Elsevier, vol. 48(1), pages 39-62, February.
  13. von Zedtwitz, Maximilian & Gassmann, Oliver, 2002. "Market versus technology drive in R&D internationalization: four different patterns of managing research and development," Research Policy, Elsevier, vol. 31(4), pages 569-588, May.
  14. Belderbos, Rene, 2001. "Overseas innovations by Japanese firms: an analysis of patent and subsidiary data," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/100664, Katholieke Universiteit Leuven.
  15. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  16. Francesca Sanna-Randaccio & Reinhilde Veugelers, 2007. "Multinational knowledge spillovers with decentralised R&D: a game-theoretic approach," Journal of International Business Studies, Palgrave Macmillan, vol. 38(1), pages 47-63, January.
  17. Gersbach, Hans & Schmutzler, Armin, 1999. "External spillovers, internal spillovers and the geography of production and innovation," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 679-696, November.
  18. Ginarte, Juan C. & Park, Walter G., 1997. "Determinants of patent rights: A cross-national study," Research Policy, Elsevier, vol. 26(3), pages 283-301, October.
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  20. Petit, Maria-Luisa & Sanna-Randaccio, Francesca, 2000. "Endogenous R&D and foreign direct investment in international oligopolies," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 339-367, February.
  21. Belderbos, Rene, 2003. "Entry mode, organizational learning, and R&D in foreign affiliates: Evidence from Japanese firms," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/101128, Katholieke Universiteit Leuven.
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Citations

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Cited by:
  1. Suzuki, Shinya, 2012. "Internationalization of R&D activities by multinational firms.," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/340794, Katholieke Universiteit Leuven.
  2. Belderbos, Rene & Leten, Bart & Suzuki, Shinya, 2009. "Does Excellence in Academic Research Attract Foreign R&D?," UNU-MERIT Working Paper Series 066, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  3. Belderbos, Rene & Gilsing, Victor & Jacob, Jojo, 2011. "Technology alliances in emerging economies: Persistence and interrelation in European firms' alliance formation," UNU-MERIT Working Paper Series 026, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  4. Huang, Can & Jacob, Jojo, 2012. "Determinants of quadic patenting: Market access, imitative threat, competition and strength of intellectual property rights," UNU-MERIT Working Paper Series 053, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  5. SUZUKI Shinya & Rene BELDERBOS & KWON Hyeog Ug & FUKAO Kyoji, 2012. "The Impact of Host Countries' University Research and University-Industry Collaboration on the Location of Research and Development: Evidence from Japanese multinational firms," Discussion papers 12080, Research Institute of Economy, Trade and Industry (RIETI).
  6. Rachel Griffith & Helen Miller, 2011. "Innovation in China: the rise of Chinese inventors in the production of knowledge," IFS Working Papers W11/15, Institute for Fiscal Studies.

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