The Internationalisation of Business R & D
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The Internationalisation of Business R & D

Edited by Bernhard Dachs, Robert Stehrer and Georg Zahradnik

It has become clear that over the past few decades enterprises not only produce and sell abroad but increasingly also develop goods and services outside their home countries; a development now known as the internationalisation of business R & D. This book presents a comprehensive picture of the current state of internationalisation of R & D in the business sector.
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Chapter 11: Impacts of R & D Internationalisation on domestic R & D Activities

Sandra Leitner and Robert Stehrer


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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