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Strategies Pursued by Swiss Firms in Investing in R&D at Foreign Locations : An Empirical Analysis Based on Firm-level Data

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Abstract

The aim of this paper is twofold: Firstly, we try to identify and characterise different types of strategies firms pursue in performing foreign R&D. Secondly, it is analysed whether the types of R&D strategies we identified in the first part differ in terms of their impact on firm productivity. In order to identify foreign R&D strategies we perform, in a first step, a non-hierarchical cluster analysis of data on the firms’ motives for investing abroad in R&D. In a second step, we characterise these clusters by use of a large number of variables that, according to the well-known OLI paradigm, determine a firm’s FDI in distribution, manufacturing and R&D. In this way, we can check whether the clusters identified by applying a (purely) statistical classification procedure effectively may be interpreted as “types of foreign R&D strategies”. We end up with four types of strategies, which significantly differ in terms of characteristics that are important according to the OLI approach. In the second part we estimate a production function where the standard factor inputs are complemented by domestic R&D and strategy-specific foreign R&D. It turns out that only one of the four strategies exerts a positive influence on firm productivity. However, it cannot be excluded that some of the other strategies have, in the longer run, a positive productivity effect as well. The paper also finds that foreign and domestic R&D, on balance, are complements.

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Bibliographic Info

Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 06-154.

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Length: 35 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:kof:wpskof:06-154

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Keywords: Internationalisation of R&D; outward FDI in R&D; motives for foreign R&D; types of foreign R&D strategies; foreign R&D and productivity; substitution vs. complementarity of foreign and domestic R&D.;

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Cited by:
  1. Michel, Julie, 2007. "The effects of FDI in R&D on home countries, the case of Switzerland," MPRA Paper 6400, University Library of Munich, Germany.

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