Thursday, 25 March 2010: 09:00
Foreign Direct Investment in R&D activities: Location and Motivations of Swiss foreign R&D Tasks
Philippe Gugler and Julie Michel
R&D is thus a priority in national policy on growth. In order to sustain the capacity of innovation, policies and managers need to take into consideration the new developments in R&D strategies. First, innovative activities are becoming increasingly internationalized. Although some R&D activities have been undertaken abroad for a long time, this trend was accelerated in the 1990s. According to UNCTAD, between 1993 and 2002, R&D expenditure of foreign affiliates worldwide had more than doubled from 29 billion dollars to 67 billion dollars. This growth was more than twice as fast as that of global R&D spending by enterprises. Studies on the implications of foreign R&D activities on home economies are still scarce and data on foreign R&D are limited. The effects of the internationalization thus need to be analyzed, as it is important to understand the role of the international linkages of geographically dispersed R&D in the competitiveness of the multinational enterprises (MNEs) and domestic companies. Secondly, there has been a change in the localisation of foreign R&D activities. Even if developed countries, notably the United States (US) and theUnited Kingdom , are the main destination for R&D, emerging countries are becoming new partners in innovative activities. It is essential to know what the role of R&D is in these new locations to determine whether these countries are competing with developed countries in the attraction of R&D investment. Thirdly, the motives of foreign R&D are evolving. Until the 1980s, the main role of R&D abroad was to adapt products to market conditions. The internationalization of R&D was thus a consequence of the globalisation of production activities and sales.
Switzerland has been chosen for this investigation for the following reasons: First, Switzerland is an innovation-driven economy with unique values in advanced skills and infrastructure. Secondly, the Swiss economy is significantly internationalised: it ranked fourth in the FDI index in 2007. The total stock of Swiss FDI abroad has more than tripled since the second half of the 1990s, reaching 632 billion Swiss francs in 2006, up from 164 billion in 1995. Finally, Switzerland reports the highest internationalisation of R&D ratio in the OECD Activities of Foreign Affiliates.
The first part of this paper analyses from a theoretical point of view the motivations for the internationalisation of R&D activities and the consequences for the domestic firms' specific advantages and the home country's specific advantages. In the second part of this paper, the hypotheses on the motivations and impacts of foreign R&D are tested through an empirical investigation. The data includes 39,281 patents and 6,620 patent citations published by the European Patent Office (EPO) from December 1978 to September 2006. The 71 MNEs included in the data set have their headquarters inSwitzerland
Philippe Gugler and Julie Michel
R&D is thus a priority in national policy on growth. In order to sustain the capacity of innovation, policies and managers need to take into consideration the new developments in R&D strategies. First, innovative activities are becoming increasingly internationalized. Although some R&D activities have been undertaken abroad for a long time, this trend was accelerated in the 1990s. According to UNCTAD, between 1993 and 2002, R&D expenditure of foreign affiliates worldwide had more than doubled from 29 billion dollars to 67 billion dollars. This growth was more than twice as fast as that of global R&D spending by enterprises. Studies on the implications of foreign R&D activities on home economies are still scarce and data on foreign R&D are limited. The effects of the internationalization thus need to be analyzed, as it is important to understand the role of the international linkages of geographically dispersed R&D in the competitiveness of the multinational enterprises (MNEs) and domestic companies. Secondly, there has been a change in the localisation of foreign R&D activities. Even if developed countries, notably the United States (US) and the
Switzerland has been chosen for this investigation for the following reasons: First, Switzerland is an innovation-driven economy with unique values in advanced skills and infrastructure. Secondly, the Swiss economy is significantly internationalised: it ranked fourth in the FDI index in 2007. The total stock of Swiss FDI abroad has more than tripled since the second half of the 1990s, reaching 632 billion Swiss francs in 2006, up from 164 billion in 1995. Finally, Switzerland reports the highest internationalisation of R&D ratio in the OECD Activities of Foreign Affiliates.
The first part of this paper analyses from a theoretical point of view the motivations for the internationalisation of R&D activities and the consequences for the domestic firms' specific advantages and the home country's specific advantages. In the second part of this paper, the hypotheses on the motivations and impacts of foreign R&D are tested through an empirical investigation. The data includes 39,281 patents and 6,620 patent citations published by the European Patent Office (EPO) from December 1978 to September 2006. The 71 MNEs included in the data set have their headquarters in