A patent analysis of foreign direct innovative R&D activities in central Europe : The Czech Case

This paper questions the nature of the foreign direct R&D investments in Central Europe. Do the affiliates of the multinationals still undertake adaptive R&D? Have they recently engaged in innovative R&D activities in their Central European affiliates? Because patents result from the firm's investments in basic research and applied development, we consider patent data as a good proxy of the firm's genuine inventive activity. We build a sample made of the 10 multinationals representing the most active R&D investors in the Czech Republic — the Central European leader as regards of foreign direct R&D investments — and in the major foreign direct R&D sectors — electronics, electrical equipment, machinery and motor vehicles — and assess the recent evolution of their patenting activity. We suggest that (a) even these major R&D investors still only marginally apply for patents in their Czech affiliates; (b) there is no under-evaluation of the innovation activity of the Czech affiliates due to a geographical separation of inventions — in the Czech Republic — and patent location — in Western Europe; (c) the researchers working in the Czech affiliates are still not sufficiently oriented towards innovation activities to be integrated in the patenting-oriented international teams built by the multinationals. Foreign direct R&D investments in Central Europe remain mostly production supportive and associated with the international exploitation of technology produced in the Western headquarters and affiliates. Despite the strong engagement of the Czech government towards foreign direct R&D, real innovative R&D increases very slowly.