New Perspectives on the Modern Corporation series
Edited by Bernhard Dachs, Robert Stehrer and Georg Zahradnik
Chapter 11: Impacts of R & D Internationalisation on domestic R & D Activities
Host countries can benefit considerably from R & D activities of foreignowned firms. The literature reviewed in Chapter 2 lists different types of benefits: first, R & D expenditure of foreign-owned firms may increase aggregate R & D and innovation expenditure of the country; second, inward R & D expenditure may give rise to substantial information and knowledge spillovers; third, foreign-owned firms may boost the demand for skilled personnel including R & D staff; finally, inward R & D and the presence of foreignowned firms may lead to structural change and agglomeration effects. On the contrary, inward R & D may also entail negative effects for the host country. First, host countries may lose the control over their indigenous innovation capacity; second, if foreign-owned affiliates predominantly pursue adaptive innovation, this may lead to fewer radical innovations; third, multinational firms may separate research and production and their R & D may yield fewer jobs in the host country than in the case of a domestic firm; finally, the increased presence of foreign-owned firms may increase competition with domestic firms for skilled personnel, which may lead to a crowding-out of R & D activities of domestically owned firms. Against that backdrop, the ensuing analysis attempts to identify impacts and consequences of the internationalisation of R & D and the presence of foreign-owned firms on the host country. First, the effects on the level of domestic R & D expenditure and domestic R & D intensities (defined as the share of R & D expenditure of domestically owned firms in their value added) are investigated. In a second step the analysis throws light on the effects on domestic patenting activities.
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