Problems of Growth and Stability
New Horizons in International Business series
Edited by Pier Carlo Padoan, Paul A. Brenton and Gavin Boyd
Chapter 6: Technology, productivity and structural change
Sarianna M. Lundan In this chapter we will explore the consequences of the internationalization of corporate research and development (R&D) for the locational patterns of innovative activity. The process of innovation has been characterized as a coupling activity by comparing it to a pair of scissors, with demand–pull representing one blade and innovation–push representing the other blade.1 We employ this metaphor in a slightly different form to represent the process of industrial innovation as the coupling of innovative ideas on one side, and financing and marketing capability on the other side. While we are not suggesting that this approach is particularly novel, it allows us to discuss the two essential aspects of the innovation process that make the role of multinational enterprises (MNEs) in this process a critical one. We know from existing research that innovations are concentrated within large firms, and that although the number of research-intensive small firms continues to grow, both in terms of output as measured by patent citations as well as input as measured by R&D expenditures, large firms claim the lion’s share of innovative activity in many sectors, although sectoral differences are substantial (Freeman and Soete, 1997). It should also been noted that, in the USA, the share of federally funded research has continuously declined in the aftermath of the cold war, while corporate investment in R&D has become by far the most important source of research financing. In fact, this is the case in all the G8 countries,...
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