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Knowledge Seeking and Location Choice of Foreign Direct Investment in the United States

Author

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  • Wilbur Chung

    (The Wharton School, University of Pennsylvania, 2027 Steinberg-Dietrich Hall, Philadelphia, Pennsylvania 19104)

  • Juan Alcácer

    (Stern School of Business, New York University, New York, New York 10012)

Abstract

To what extent do firms go abroad to access technology available in other locations? This paper examines whether and when state technical capabilities attract foreign investment in manufacturing from 1987-1993. We find that on average state R&D intensity does not attract foreign direct investment. Most investing firms are in lower-tech industries and locate in low R&D intensity states, suggesting little interest in state technical capabilities. In contrast, we find that firms in research-intensive industries are more likely to locate in states with high R&D intensity. Foreign firms in the pharmaceutical industry value state R&D intensity the most, at a level twice that of firms in the semiconductor industry, and four times that of electronics firms. Interestingly, not only firms from technically lagging nations, but also some firms from technically leading nations are attracted to R&D intensive states. This suggests that beyond catching up, firms use knowledge-seeking investments also to source technical diversity.

Suggested Citation

  • 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.
    • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:12:p:1534-1554
    DOI: 10.1287/mnsc.48.12.1534.440
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    References listed on IDEAS

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