IDEAS home Printed from
   My bibliography  Save this paper

Determinants of Swiss firms' R&D activities at foreign locations



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" .

Suggested Citation

  • Spyros Arvanitis & Heinz Hollenstein, 2006. "Determinants of Swiss firms' R&D activities at foreign locations," KOF Working papers 06-127, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:06-127

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(1), pages 1-24, March.
    2. Spyros Arvanitis & Heinz Hollenstein, 2001. "Technologiestandort Schweiz im Zuge der Globalisierung: Eine explorative Analyse der F&E-Aktivitäten schweizerischer Industrieunternehmen im Ausland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 137(II), pages 129-148, June.
    3. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-277, July.
    4. Granstrand, Ove, 1999. "Internationalization of corporate R&D: a study of Japanese and Swedish corporations1," Research Policy, Elsevier, vol. 28(2-3), pages 275-302, March.
    5. 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.
    6. Gassmann, Oliver & von Zedtwitz, Maximilian, 1999. "New concepts and trends in international R&D organization," Research Policy, Elsevier, vol. 28(2-3), pages 231-250, March.
    7. Bas, Christian Le & Sierra, Christophe, 2002. "'Location versus home country advantages' in R&D activities: some further results on multinationals' locational strategies," Research Policy, Elsevier, vol. 31(4), pages 589-609, May.
    8. Heinz Hollenstein, 2005. "Determinants of International Activities: Are SMEs Different?," Small Business Economics, Springer, vol. 24(5), pages 431-450, June.
    9. Cantwell, John & Janne, Odile, 1999. "Technological globalisation and innovative centres: the role of corporate technological leadership and locational hierarchy1," Research Policy, Elsevier, vol. 28(2-3), pages 119-144, March.
    10. John Cantwell & Rajneesh Narula, 2001. "The Eclectic Paradigm in the Global Economy," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(2), pages 155-172.
    11. Rajneesh Narula & Antonello Zanfei, 2003. "Globalisation of Innovation The Role of Multinational Enterprises," DRUID Working Papers 03-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    12. John Cantwell & Lucia Piscitello, 2005. "Recent Location of Foreign-owned Research and Development Activities by Large Multinational Corporations in the European Regions: The Role of Spillovers and Externalities," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 1-16.
    13. Thomas Andersson, 1998. "Internationalization Of Research And Development-Causes And Consequences For A Small Economy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(1), pages 71-91.
    14. Manolopoulos, Dimitris & Papanastassiou, Marina & Pearce, Robert, 2005. "Technology sourcing in multinational enterprises and the roles of subsidiaries: An empirical investigation," International Business Review, Elsevier, vol. 14(3), pages 249-267, June.
    15. G R G Benito & B Grøgaard & R Narula, 2003. "Environmental influences on MNE subsidiary roles: economic integration and the Nordic countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(5), pages 443-456, September.
    16. Paola Criscuolo & Rajneesh Narula & Bart Verspagen, 2005. "Role of home and host country innovation systems in r&d internationalisation: a patent citation analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(5), pages 417-433.
    17. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    18. Patel, Pari & Vega, Modesto, 1999. "Patterns of internationalisation of corporate technology: location vs. home country advantages1," Research Policy, Elsevier, vol. 28(2-3), pages 145-155, March.
    19. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    20. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    21. 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.
    22. Wilfred J. Ethier, 1986. "The Multinational Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 805-833.
    23. Odagiri, Hiroyuki & Yasuda, Hideto, 1996. "The determinants of overseas R&D by Japanese firms: an empirical study at the industry and company levels," Research Policy, Elsevier, vol. 25(7), pages 1059-1079, October.
    24. Nigel Driffield & James H. Love, 2005. "Who Gains From Whom?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(5), pages 663-686, November.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Tiwari, Rajnish & Buse, Stephan & Herstatt, Cornelius, 2007. "Innovation via global route: Proposing a reference model for chances and challenges of global innovation processes," Working Papers 49, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
    2. Heinz Hollenstein, 2009. "Characteristics of Foreign R&D Strategies of Swiss Firms: Implications for Policy," Chapters,in: The New Economics of Technology Policy, chapter 19 Edward Elgar Publishing.
    3. Michel, Julie, 2007. "The effects of FDI in R&D on home countries, the case of Switzerland," MPRA Paper 6400, University Library of Munich, Germany.
    4. Wixted, Brian, 2006. "Cluster Complexes: A Framework for Understanding the Internationalisation of Innovation Systems," MPRA Paper 846, University Library of Munich, Germany.
    5. Spyros Arvanitis & Heinz Hollenstein, 2010. "How Do Different Motives for R&D Investment in Foreign Locations Affect Domestic Firm Performance? An Analysis Based on Swiss Panel Micro Data," WIFO Working Papers 375, WIFO.
    6. Spyros Arvanitis & Heinz Hollenstein, 2010. "How Do Different Motives for R&D Investment in Foreign Locations Affect Domestic Firm Performance?," KOF Working papers 10-258, KOF Swiss Economic Institute, ETH Zurich.
    7. Martin Berger & Heinz Hollenstein, 2012. "Determinants of equity-based and co-operative foreign R&D and impact on the parent firm's performance," KOF Working papers 12-305, KOF Swiss Economic Institute, ETH Zurich.

    More about this item


    Foreign R&D; Determinants of foreign R&D; Motives of foreign R&D; OLI paradigm; Asset augmenting; Asset exploiting;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:kof:wpskof:06-127. 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.