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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.

Suggested Citation

  • Bernhard Dachs & Sandra M. Leitner & Robert Stehrer, 2012. "The Gravity of Cross-border R&D Expenditure," wiiw Working Papers 91, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:wpaper:91

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    References listed on IDEAS

    1. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-1055, July.
    2. Fagerberg, Jan, 1988. "International Competitiveness," Economic Journal, Royal Economic Society, vol. 98(391), pages 355-374, June.
    3. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
    4. Grupp, Hariolf, 1994. "The measurement of technical performance of innovations by technometrics and its impact on established technology indicators," Research Policy, Elsevier, vol. 23(2), pages 175-193, March.
    5. Bernard, Andrew B & Jones, Charles I, 1996. "Technology and Convergence," Economic Journal, Royal Economic Society, vol. 106(437), pages 1037-1044, July.
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    Cited by:

    1. Arne J. Nagengast & Robert Stehrer, 2016. "The Great Collapse in Value Added Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 392-421, May.
    2. Roman Stöllinger, 2015. "Agglomeration and FDI: Bringing International Production Linkages into the Picture," wiiw Working Papers 121, The Vienna Institute for International Economic Studies, wiiw.
    3. Johannes Pöschl & Katarina Valkova, 2015. "Welfare State Regimes and Social Determinants of Health in Europe," wiiw Working Papers 118, The Vienna Institute for International Economic Studies, wiiw.
    4. Davide Castellani & Giulio Giangaspero & Antonello Zanfei, 2013. "Heterogeneity and distance. Some propositions on how differences across regions, firms and functions affect the role of distance in FDI location decisions," Working Papers 1308, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.

    More about this item


    internationalization of R&D; multinational firms; gravity model;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L6 - Industrial Organization - - Industry Studies: Manufacturing


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