Internationalization of corporate R&D activities and innovation performance

The internationalization of corporate research and development (R&D) activities is a growing phenomenon, but previous empirical studies provide inconclusive evidence of its effects on the innovation performance of firms. This article examines how the innovation performance of European firms changes when they begin to internationalize their R&D activities. Propensity score matching and difference-in-differences methods are applied to control for self-selection and to estimate the causal effect of R&D internationalization. Patent inventor data are used to track the locations of corporate R&D activities. Information on patent applications, patent citations, and technological fields is used to measure innovation output, quality, and diversity, respectively. The results indicate that firms with a greater number of previous innovations are more likely to begin international R&D activities. Moreover, beginning R&D internationalization further increases the innovative output of firms. The results also indicate a weaker increase in the technological diversity of innovation activities. In contrast, the difference in the average quality of innovations in favor of international firms is shown to be due to self-selection.