The New Economics of Technology Policy
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The New Economics of Technology Policy

Edited by Dominique Foray

This book focuses on technological policies, in other words all public interventions intended to influence the intensity, composition and direction of technological innovations within a given entity (region, country or group of countries). The editor has gathered together many of the leading scholars in the field to comprehensively explore numerous avenues and pathways of research. The book sheds light on the theory and practice of technological policies by employing modern analytical tools and economic techniques.
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Chapter 19: Characteristics of Foreign R & D Strategies of Swiss Firms: Implications for Policy

Heinz Hollenstein


19. Characteristics of foreign R&D strategies of Swiss firms: implications for policy Heinz Hollenstein INTRODUCTION 19.1 Since the early 1980s the internationalization of Swiss firms’ research and development (R&D) activities has strongly increased. Similar trends are observed in other countries (Narula and Zanfei, 2005; Veugelers et al., 2005). As a result there is increasing concern in Switzerland (and in other countries as well: see Håkanson and Nobel, 1993; OECD, 1998; Veugelers et al., 2005) that foreign R&D activities may substitute for domestic ones. On the other hand, it is argued that foreign R&D is a means to support production and sales activities in foreign markets and to tap into the worldwide pool of knowledge. In this view, foreign R&D complements and augments the domestic knowledge base, given that the transfer of knowledge to the headquarters works sufficiently well. Whether one or the other hypothesis holds true depends to a large extent on the strategies firms pursue by investing abroad in R&D. According to the classical model of international trade and investment, differences among countries with respect to (relative) costs are the driver of foreign investments (Mundell, 1957). Reducing costs (increasing efficiency) is the prime motive for performing foreign R&D. In this theoretical setting, foreign and domestic R&D are substitutes. In contrast, the experience with foreign direct investment (FDI) in the 1960s showed that some R&D in foreign locations was often required for successfully penetrating and developing local markets. Foreign R...

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