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The Gravity of Cross-border R&D Expenditure

  • Bernhard Dachs
  • Sandra M. Leitner

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

  • Robert Stehrer

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

While up to the 1990s, R&D was still ‘an important case of non-globalization’ (Patel and Pavitt 1991), the internationalization of business R&D activities has accelerated significantly during the past two decades. R&D activities of foreign affiliates have become one of the most dynamic elements of the process of globalization. Until recently, the main recipients of cross-border R&D expenditure were developed countries, though new players have emerged lately, particularly in Asia. Against that backdrop, the paper applies a recently compiled novel data set on R&D expenditure of foreign-owned firms in the manufacturing sectors of a set of OECD countries and identifies specific home- and host-country characteristics that are conducive or obstructive to cross-border R&D expenditure of foreign affiliates. The results point to the pivotal role of market size and of cultural, physical and technological proximity for R&D efforts of foreign-owned firms. Moreover, the analysis demonstrates that sufficient human capital and strong indigenous technological capabilities in the host country tend to be conducive to R&D activities of foreign affiliates. In contrast, a rich human capital base in the home country is obstructive to the process of R&D internationalization. Geographic distance turns out to be a strong deterrent.

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Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 91.

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Length: 24 pages including 5 Tables and 4 Figures
Date of creation: Jul 2012
Date of revision:
Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:91
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