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Subsidiary research and development, and the local environment

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  • Davis, Lee N.
  • Meyer, Klaus E.

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.

Suggested Citation

  • Davis, Lee N. & Meyer, Klaus E., 2004. "Subsidiary research and development, and the local environment," International Business Review, Elsevier, vol. 13(3), pages 359-382, June.
  • Handle: RePEc:eee:iburev:v:13:y:2004:i:3:p:359-382
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Santos-Paulino, Amelia U. & Squicciarini, Mariagrazia & Fan, Peilei, 2008. "R&D (Re)location: A Bird's Eye (Re)view," WIDER Working Paper Series 100, World Institute for Development Economic Research (UNU-WIDER).
    4. Athreye, Suma & Batsakis, Georgios & Singh, Satwinder, 2016. "Local, global, and internal knowledge sourcing: The trilemma of foreign-based R&D subsidiaries," Journal of Business Research, Elsevier, vol. 69(12), pages 5694-5702.
    5. 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.
    6. 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.
    7. Michele Cincera & Claudio Cozza & Alexander Tübke, 2014. "Main drivers for local and global R&D sourcing of European Multinational Enterprises," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 4(2), pages 227-245, December.
    8. Hsu, Chia-Wen & Lien, Yung-Chih & Chen, Homin, 2015. "R&D internationalization and innovation performance," International Business Review, Elsevier, pages 187-195.
    9. 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.
    10. 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.
    11. repec:spr:manint:v:49:y:2009:i:1:d:10.1007_s11575-008-0124-7 is not listed on IDEAS
    12. 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.
    13. Constantina Kottaridi & Marina Papanastassiou & Christos Pitelis, 2007. "Determinants of MNE subsidiaries decision to set uo own R&D laboratories: Theory and Evidence," Working Papers 007, University of Peloponnese, Department of Economics.
    14. repec:spr:manint:v:51:y:2011:i:2:d:10.1007_s11575-011-0072-5 is not listed on IDEAS
    15. 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.
    16. repec:ttu:rebcee:92 is not listed on IDEAS
    17. Sasaki, Innan & Yoshikawa, Katsuhiko, 2014. "Going beyond national cultures – Dynamic interaction between intra-national, regional, and organizational realities," Journal of World Business, Elsevier, vol. 49(3), pages 455-464.
    18. Michailova, Snejina & Zhan, Wu, 2015. "Dynamic capabilities and innovation in MNC subsidiaries," Journal of World Business, Elsevier, vol. 50(3), pages 576-583.
    19. Lee Davis, 2004. "Intellectual property rights, strategy and policy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(5), pages 399-415.
    20. 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.
    21. 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.
    22. Dirk Holtbrügge & Carina B. Friedmann, 2016. "Does location choice affect foreign subsidiary success in India? An empirical study based on Porter's diamond model," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 8(1), pages 3-29.

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