Strategic R&D location in European manufacturing industries.

We develop and empirically test a model of foreign R&D investments that takes into account strategic interaction in R&D location decisions by multinational firms in the context of R&D spillovers and foreign technology sourcing strategies. In a two-country, two-firm model with cross investments, the optimal share of R&D performed abroad depends on the efficiency of intra-firm international technology transfer, the degree of inter-firm R&D spillovers, the intensity of product market competition, and the importance of the general knowledge pool. The impact of these factors differs markedly between technology leading firms and technology laggards. We find support for most of the predictions of the model in an empirical analysis of patents based on innovations in foreign countries by 131 leading European manufacturing firms in 22 ISIC industries in 1996-1997. For technology leaders, the share of patents originating in other EU countries responds positively to host country product market competition and is strongly increasing in the level of intellectual property rights protection. Foreign R&D by technology laggards is discouraged by host country competition but increases with the efficiency of (reverse) technology transfer. Foreign R&D of both leaders and laggards increases with the size of the local knowledge pool and the size of production operations in the host country.Competition; Country; Decision; Decisions; Efficiency; Empirical analysis; Factors; Firms; Impact; Industries; Industry; Innovation; Innovations; Intellectual property; Intensity; Interfirm R&D; International; Investment; Investments; Knowledge; Manufacturing; Manufacturing firms; Market; Model; Multinational firms; Optimal; Patents; Prediction; Predictions; Product; R&D; Size; Sourcing; Spillovers; Strategy; Technology; Technology transfer;

Characteristics of Foreign R&D Strategies of Swiss Firms: Implications for Policy

The aim of the paper is, firstly, to identify a number of strategies Swiss firms pursue by performing foreign R&D, expecting that firms, in many instances, are driven by a combination of several motives (mixed strategies). Secondly, we ask whether foreign and domestic R&D are substitutes or complements. Thirdly, we draw some policy conclusions based on results for direct and indirect home-country effects of foreign R&D. By applying cluster analysis, we identified four specific patterns of motives of foreign R&D. In a second step, we investigated whether these clusters effectively may be interpreted as specific types of R&D strategies. To this end, the clusters were characterised in terms of a large number of variables, which, according to the OLI paradigm of FDI, determine foreign R&D. We found that the patterns of the four clusters systematically differ with respect to these theory-related variables. Some clusters represent, in terms of motives, broad-based mixed strategies, whereas others are strongly focused. It turns out that foreign R&D strategies that primarily aim at exploiting capabilities of the domestic headquarters dominate, whereas cost-reducing strategies are of very minor importance. In case of the other two strategies knowledge sourcing is a constituent element, in the first one, knowledge sourcing is at the core, in the second case it is an important element in the frame of a broad-based strategy. The relative importance of the four strategies implies that, on balance, foreign and domestic R&D are complements. Notwithstanding this positive result, it is sensible to take policy actions supporting the economy to capitalise even more on outward FDI in R&D. Policy basically should aim at securing the attractiveness of Switzerland as a location for R&D-intensive headquarters of firms performing foreign R&D, and at enhancing knowledge spillovers from headquarter companies to other domestic firms. The five categories of measures we recommend are part of a framework-oriented policy design rather than of a more interventionist concept.Internationalisation of R&D; Motives of foreign R&D; Foreign R&D strategies; Knowledge spillovers; Home-country effects of outward FDI in R&D

Formal and Strategic Appropriability Strategies of Multinational Firms: A Cross Country Comparison

International knowledge spillovers, especially through multinational companies (MNCs), have recently been a major topic of discussion among academics and practitioners. Most research in this field focuses on knowledge sharing activities of MNC subsidiaries. Relatively little is known about their capabilities for protecting valuable knowledge from spilling over to host country competitors. We extend this stream of research by investigating MNC appropriability strategies that go beyond formal methods (patents, copyrights, trademarks) to include strategic ones (secrecy, lead time, complex design). We conceptualize the breadth and depth of a firm?s knowledge protection strategies and relate them to the particular situation of MNC subsidiaries. Moreover, we argue that their approaches differ with regard to host country challenges and opportunities. We address these issues empirically, based on a harmonized survey of innovation activities of more than 1,800 firms located in Portugal and Germany. We find that MNCs prefer broader sets of appropriability strategies in host countries with fewer opportunities for knowledge sourcing. However, munificent host country environments require targeted sets of appropriability strategies instead. We deduce that these results are due to a need for reciprocity to benefit fully from promising host country knowledge flows. --Appropriability,Multinational Companies,Patenting

Knowledge Spillovers as a Central Element in Theories about Knowledge-Based Regional Development: Advancement in Theory and Obstacles for Empirical Research

As scientists and policymakers tend to interpret changes in the economy as a trend towards an increasingly knowledge-based economy, their recommendations and strategies for regional economic development frequently contain elements how to intensify the knowledge flows in the region concerned. Knowledge flows come into existence from intentional action, but also in an unintended way as externalities or knowledge spillovers. This paper reviews the ways regional and urban economics has dealt with the concept of knowledge spillovers. Knowledge spillovers are defined within a conceptual framework that points out different uses of knowledge in economics. The concept’s operationalisations in diverse empirical studies are systematised and discussed. After a critical review of the current state of research, policy strategies aiming to intensify knowledge spillovers are classified. The paper concludes with an outlook on promising new approaches to research knowledge spillovers and on the elaboration of more efficient policy strategies.knowledge spillovers, tacit knowledge, codified knowledge, transfer mechanisms, related variety

Models of regional growth: past, present and future

This paper presents an overview of various models of regional growth that have appeared in the literature in the last 40 years. It considers the past, and therefore supply-side models, such as the standard neoclassical, juxtaposed against essentially demand-side approaches such as the export-base and cumulative causation models (as integrated into the Kaldorian approach); before moving on to the present and more recent versions of the neoclassical model involving spatial weights and "convergence clubs", as well as New Economic Geography core-periphery models, and the "innovation systems" approach. A key feature of the more recent literature is an attempt to explicitly include spatial factors into the model, and thus there is a renewed emphasis on agglomeration economies and spillovers. Discussing "present" and "future" approaches to regional growth overlaps with the current emphasis in the literature on the importance of more intangible factors such as the role of "knowledge" and its influence on growth. Lastly, there is a discussion of the greater emphasis that needs to be placed at the "micro-level" when considering what drives growth, and thus factors such as inter alia firm heterogeneity, entrepreneurship, and absorptive capacity

Organization of Multinational Activities and Ownership Structure

We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration

The countryside in urbanized Flanders: towards a flexible definition for a dynamic policy

The countryside, the rural area, the open space, … many definitions are used for rural Flanders. Everyone makes its own interpretation of the countryside, considering it as a place for living, working or recreating. The countryside is more than just a geographical area: it is an aggregate of physical, social, economic and cultural functions, strongly interrelated with each other. According to international and European definitions of rural areas there would be almost no rural area in Flanders. These international definitions are all developed to be used for analysis and policy within their specific context. They are not really applicable to Flanders because of the historical specificity of its spatial structure. Flanders is characterized by a giant urbanization pressure on its countryside while internationally rural depopulation is a point of interest. To date, for every single rural policy initiative – like the implementation of the European Rural Development Policy – Flanders used a specifically adapted definition, based on existing data or previously made delineations. To overcome this oversupply of definitions and delineations, the Flemish government funded a research project to obtain a clear and flexible definition of the Flemish countryside and a dynamic method to support Flemish rural policy aims. First, an analysis of the currently used definitions of the countryside in Flanders was made. It is clear that, depending on the perspective or the policy context, another definition of the countryside comes into view. The comparative study showed that, according to the used criteria, the area percentage of Flanders that is rural, varies between 9 and 93 per cent. Second, dynamic sets of criteria were developed, facilitating a flexible definition of the countryside, according to the policy aims concerned. This research part was focused on 6 policy themes, like ‘construction, maintenance and management of local (transport) infrastructures’ and ‘provision of (minimum) services (education, culture, health care, …)’. For each theme a dynamic set of criteria or indicators was constructed. These indicators make it possible to show where a policy theme manifests itself and/or where policy interventions are possible or needed. In this way every set of criteria makes up a new definition of rural Flanders. This method is dynamic; new data or insights can easily be incorporated and new criteria sets can be developed if other policy aims come into view. The developed method can contribute to a more region-oriented and theme-specific rural policy and funding mechanism

Globalisation of Innovation The Role of Multinational Enterprises

This paper undertakes a brief evaluation of the trends in the internationalization of innovative activities. We provide a taxonomy of R&D internationalization strategies, and discuss the main relevant theoretical and empirical issues, before discussing the centripetal and centrifugal forces underlying the nature and evolution of cross border innovation. We address the issue of international technology partnering as a key strategy that is complementary to the internationalisation of innovative activities through internal means, before raising important policy dimensions and directions for future research that derive from these debates.R&D internationalization, globalisation, multinationals, alliances, technology policy

Knowledge Spillover Agents and Regional Development

It is widely recognised that knowledge and highly skilled individuals as "carriers" of knowledge (i.e. knowledge spillover agents) play a key role in impelling the development and growth of cities and regions. In this paper we discuss the relation between the mobility of talent and knowledge flows. In this context, several issues are examined, including the role of highly skilled labour for regional development, the features that characterise knowledge spillovers through labour mobility, the key factors for attracting and retaining talent as well as the rise of "brain gain" policies. Although the paper deals with highly skilled mobility and migration in general, a particular attention will be paid to flows of (star) scientists.Series: SRE - Discussion Paper

Why are technological spillovers spatially bounded ? A market orientated approach.

According to empirical evidence, technological spillovers are spatially bounded. This is one of the main reasons why firms are induced to locate in close prox-imity despite tough competition. This paper is an attempt to endogenize such spillovers. For that purpose, we try to explain why spatial proximity gives more incentives to competing firms to share knowledge. We show that spatial proxim-ity is the best way for firms to prevent free-riding in case of knowledge sharing. Indeed, Þercer competition impedes free riding provided that such a behavior dampens firms efficiency and have a dramatic effect on profits. Moreover, our results have important implications for regional policy. We point out that a slight decrease in transport costs triggers spatial polarization which implies knowledge sharing and thereby enhances innovation. A more dramatic decrease in transport costs attains both the objectives of increasing innovation and regional equity.