IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/3151.html
   My bibliography  Save this paper

Multinational Knowledge Spillovers with Centralized versus Decentralized R&D: A Game Theoretic Approach

Author

Listed:
  • Sanna-Randaccio, Francesca
  • Veugelers, Reinhilde

Abstract

This Paper provides a theoretical model on the trade-offs an MNE face when assigning subsidiaries an active role in innovation and organizing its R&D decentralized versus centralized. R&D decentralization avoids having to adapt centrally developed innovations to local markets, being able to use the specific know-how of the subsidiary. In addition R&D subsidiaries can be used to source locally available external know-how. But the MNE has to organize the transfer of local know-how internally so as to be able to benefit from this location specific know-how throughout the organization. At the same time, decentralization of R&D to the subsidiary level intensifies the challenge of effectively appropriating core technology know-how, preventing the spilling over of valuable know-how to competitors, located in the foreign markets. While R&D decentralization has repercussions on both intra-company technology transfers as well as inter-company technology spillovers, it emerges as a possible equilibrium outcome from the resulting strategic interaction between the foreign subsidiary and local competition. The proposed model treats both internal and external spillovers in a game-theoretic context explicitly recognizing that absorptive capacity is required to be able to use external spillovers. The analysis suggests that a strong local know-how base is not a univocally positive factor for locating R&D abroad and indicates the critical complementary role of managing internal and external spillovers to capitalize on the benefits from R&D decentralization. It also shows that the intensity of product market competition in the host country is important, especially in determining the outgoing spillover costs.

Suggested Citation

  • Sanna-Randaccio, Francesca & Veugelers, Reinhilde, 2002. "Multinational Knowledge Spillovers with Centralized versus Decentralized R&D: A Game Theoretic Approach," CEPR Discussion Papers 3151, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3151
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3151
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-277, July.
    2. Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-413, August.
    3. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
    4. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 577-598.
    5. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    6. Edwin Mansfield & Anthony Romeo, 1980. "Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 95(4), pages 737-750.
    7. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(1), pages 1-31, March.
    8. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-640, June.
    9. Cantwell, John, 1995. "The Globalisation of Technology: What Remains of the Product Cycle Model?," Cambridge Journal of Economics, Oxford University Press, vol. 19(1), pages 155-174, February.
    10. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
    11. Pierre Mohnen, 1992. "International R&D Spillovers," Cahiers de recherche du Département des sciences économiques, UQAM 9208, Université du Québec à Montréal, Département des sciences économiques.
    12. Gersbach, Hans & Schmutzler, Armin, 1999. "External spillovers, internal spillovers and the geography of production and innovation," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 679-696, November.
    13. Pari Patel & Keith Pavitt, 1991. "Large Firms in the Production of the World’s Technology: An Important Case of “Non-Globalisation”," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(1), pages 1-21, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bernard Franck & Robert Frank Owen, 2004. "L'internationalisation de la recherche fondamentale d'une firme," Revue d'économie politique, Dalloz, vol. 114(3), pages 353-370.
    2. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, 2008. "Taxes and Decision Rights in Multinationals," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(2), pages 245-258, April.
    3. Søren Bo Nielsen & Pascalis Raimondos-Møller & Guttorm Schjelderup, 2005. "Centralized vs. De-centralized Multinationals and Taxes," CESifo Working Paper Series 1586, CESifo Group Munich.
    4. Kiessling, Timothy S. & Richey, R. Glenn & Meng, Juan & Dabic, Marina, 2009. "Exploring knowledge management to organizational performance outcomes in a transitional economy," Journal of World Business, Elsevier, vol. 44(4), pages 421-433, October.
    5. Santangelo, Grazia Domenica, 2012. "The tension of information sharing: Effects on subsidiary embeddedness," International Business Review, Elsevier, vol. 21(2), pages 180-195.
    6. René Belderbos, 2006. "R&D Activities in East Asia by Japanese, European, and US Multinationals," Microeconomics Working Papers 21887, East Asian Bureau of Economic Research.
    7. René Belderbos & Elissavet Lykogianni & Reinhilde Veugelers, 2008. "Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing, and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(3), pages 759-779, September.
    8. Juan Alcácer & Wilbur Chung, 2007. "Location Strategies and Knowledge Spillovers," Management Science, INFORMS, vol. 53(5), pages 760-776, May.

    More about this item

    Keywords

    mnes; r&d decentralization; technological spillovers;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3151. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.