Attracting and embedding R&D by multinational firms: policy recommendations for EU new member states
AbstractThis paper asks: what can governments of new member states do to encourage MNEs to invest in R&D? There are two types of MNE R&D. Innovation can be undertaken in order to adapt its existing products and services to local stimuli. This is 'demand-driven R&D'. Innovation can also be in stand-alone R&D facilities which are considerably more knowledgeintensive, and imply a considerably greater dependence on domestic knowledge sources and infrastructure. This is 'supply-side R&D'. These two types of R&D require somewhat different approaches, and necessarily imply different policy options. In this paper, furthermore, we focus on the MNE and the potential for linkages, and do not limit ourselves to FDI and spillovers. MNEs engage in a variety of other informal and non-equity agreements to engage in knowledge exchange. We also deliberately consider the scope and competence at the MNE subsidiary level. These two novelties are useful in helping highlight the point that the tendency to focus on FDI flows is flawed, since knowledge exchanges and innovation are establishment level phenomena. An MNE policy is required which must link FDI policy and industrial policy in tandem. This paper argues that it is most practical to recommend that new member states focus on attracting and fostering demand-driven R&D activities by MNEs. Furthermore, we recommend that governments reduce the emphasis on costs while increasing the emphasis on specialised locationbound knowledge assets, and setting up programmes that foster demand-oriented upgrading of public R&D and human capital.
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Bibliographic InfoPaper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 033.
Date of creation: 2009
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Web page: http://www.merit.unu.edu
R&D; MNEs; EU expansion; human capital; new member states; innovation policies;
Other versions of this item:
- Narula, Rajneesh, 2009. "Attracting and embedding R&D by multinational firms: policy recommendations for EU new member states," MERIT Working Papers 033, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
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- Jude Cristina & Pop Silaghi Monica, 2011. "Innovation Versus Income Convergence In Central And Eastern Europe. Is There A Correlation?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 72-79, July.
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