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Pei Yu and Jean- Louis Mucchielli

This chapter focuses on MNCs’ R & D co-location strategies in China, and enriches recent studies by both theoretical and empirical aspects. Firstly, it constructs a conceptual framework on R & D co-location strategies, by combining location theory with R & D networking literature. Secondly, instead of a national level which causes aggregation bias, it focuses on a city level. It verifies the framework used by 185 US, 107 European and 115 Asian R & D affiliates’ location strategies across 27 Chinese cities, during the period 1992–2011. Thirdly, it adopts discrete choice models, which consider host geographic heterogeneity, to examine theoretical hypotheses. The results confirm MNCs’ cross-country differences in co-location strategies: US firms attach importance to external linkages, such as public knowledge resources and foreign R & D affiliates; however, European firms prefer internal linkages, such as intra-firm forward linkage, home country agglomeration and intra-industry spillovers. Asian firms adopt traditional cost- and market-seeking strategies. In addition, China’s geographic structure also impacts in a variety of ways on the sample firms. Key words: offshore R & D affiliates, co-location strategies, cross-country differences, China.