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Determinants of Swiss Firms’ R&D Activities at Foreign Locations: An Empirical Analysis Based on Firm-level Data

Using the OLI paradigm as theoretical framework, we explain econometrically why a firm invests in foreign R&D (model A), and, if it does, which factors determine the level of foreign R&D expenditures (model B). It turns out that the pattern of explanation is quite similar for both types of decisions. In both cases, O- and I-advantages are the main drivers of foreign R&D, whereas L-disadvantages of the Swiss location do not play any role. A descriptive analysis of a series of motives of Swiss firms for performing R&D abroad shows that market-seeking is the most important motive. Knowledge-seeking and (human) resource-seeking are of intermediate importance as motives of foreign R&D, whereas efficiency-seeking objectives are hardly relevant. These results are fully in line with those of the econometric modelling. The findings of both approaches imply that foreign and domestic R&D are complements rather than substitutes. “Asset exploiting” is more prevalent as a strategy of foreign R&D than “asset augmenting”.

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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 06-127.

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Length: 30 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:kof:wpskof:06-127
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