Global R&D activities of Japanese MNCs in the US: A triangulation approach

We examined 79 Japanese MNCs’ R&D subsidiaries in the US from the knowledge-based view. We found: (1) subsidiaries’ R&D strategies generally encouraged knowledge flows; (2) subsidiaries’ R&D alliances promoted knowledge flows; (3) R&D subsidiaries with process-oriented incentives promoted vertical knowledge flows; (3) autonomous R&D subsidiaries promoted knowledge flows from the local environments to the subsidiary; (4) R&D subsidiaries with a high level of knowledge flows accumulated a high level of knowledge; and (5) R&D subsidiaries with a high level of accumulated knowledge achieved high overall performance. Our interviews with 30 R&D subsidiaries and 10 parent companies supplement these findings.     

MNCs’ offshore R&D networks in host country's regional innovation system: The case of Taiwan-based firms in China

China has become a hot spot of R&D internationalization and a growing number of Taiwan-based firms have indeed set up R&D units in China. Taking into account China's substantial regional variations in economic development, innovation capacity, and knowledge productivity, such notions as regional innovation system (RIS) and local innovative milieu may become more relevant to the study on relationships between China and its inward R&D internationalization. Therefore, the key issue for this paper is what locational advantages of an RIS within a host country affect the network linkages and networking strategy of multinational corporations’ (MNCs’) offshore R&D units. The paper aims to enrich the current understanding of R&D internationalization in several ways. First, the paper attempts to examine the R&D networking underlying R&D internationalization by Taiwan-based firms in China, with particular reference to the sub-national level inside China. Second, the paper tries to establish a link between the literature of R&D internationalization and that of RIS, with a modified version of Dunning's eclectic paradigm. Efforts are made to map the relationship between foreign subsidiaries’ local R&D networks and their host RISs inside China. Third, the paper takes advantage of a government databank to adopt a quantitative approach, the Seemingly Unrelated Bivariate Probit Regression model, with foreign subsidiaries as the unit of analysis, to highlight the role played by some aspects of the RIS in determining the local R&D networking of Taiwanese subsidiaries in China. Our evident shows that MNCs’ offshore R&D units that purse home-based technology exploitation strategy, the mainstream strategy regarding the developing host country, tend to be located in a host region with a strong knowledge application and exploitation subsystem, while an RIS with a strong knowledge generation and diffusion subsystem, within such a developing country as China, may induce MNCs’ local R&D units to pursue home-base technology augmenting strategy. On balance, not only the location choice but also the local R&D linkages of MNCs’ offshore subsidiaries are related to appropriate fits between the RIS and the subsidiaries’ innovation network inside the host country.     

What factors determine the mode of overseas R&D by multinationals? Empirical evidence

The large expansion of MNC's overseas R&D is noteworthy. This paper investigates the factors affecting the expansion of support-oriented R&D and knowledge sourcing R&D by using qualitative data which indicate the modes of R&D conducted at a plant site and a laboratory. The empirical results suggest that (1) the export propensity of affiliate firms, relative abundance of human resources for R&D, and accumulated technological knowledge have a positive effect on both the modes of R&D at a plant site and a laboratory, and (2) the stronger enforcement of intellectual property positively affects the expansion of knowledge sourcing R&D. These results show that not only firm-specific but also country-specific factors positively affect the overseas expansion of R&D.     

Location, collocation and R&D alliances in the European ICT industry

This paper argues that spatial proximity plays a role in determining the propensity of firms to engage in R&D alliances. Drawing from economic geography, network theory and innovation theory, we discuss how prior collocation can affect the propensity to engage in R&D alliances, arguing that alliances can act both as a substitute and as a complement to collocation. Using a novel dataset matching alliances and patent data for the European ICT industry, we show that alliances are complementary to prior collocation (at both national and sub-national regional level) of firm’s R&D labs. In such an intra-industry, oligopolistic scenario, firms strategically use R&D alliances as a means to limit knowledge flows and protect competences, rather than to promote knowledge flows. Furthermore, while a common institutional context is important to promote collaboration, because of the high level of R&D internationalisation as well as the complex social networks within an oligopolistic industry, national institutional contexts are less relevant.     

Canadian R&D abroad management practices

In the 1980s, Canadian industrial R&D abroad has grown substantially. In 1995, R&D expenditures by Canadian affiliates, only in the United States, represented some US$1.4 billion and employed some 6300 persons. Nearly 60 Canadian-owned and -controlled corporations conduct overseas R&D, mostly in the US, Western Europe, Japan, and Australia. Canadian corporations are performing commercial R&D abroad in order to support their manufacturing subsidiaries and to come closer to customers and markets. A secondary motivation is to hire skilled personnel, monitor foreign technological development and increase the inflow of new ideas into the corporation. They also chose friendly socio-political environments from a regulatory point of view. Technology transfer and adaptation to local markets is also an important mission of the foreign R&D establishment. Foreign R&D activities of Canadian firms are fairly decentralized and autonomous. Most of the foreign subsidiaries undertook R&D abroad before they were acquired by the Canadian corporation; also the number of Canadian managers was reduced and the R&D projects were usually decided in the affiliate. Three main types of expatriate R&D were found: a majority of the subsidiaries were producing goods in the same or related industries as in Canada (such as machines, transportation equipment or housing equipment). A second group of firms were vertically integrated firms, that conducted process research in Canada and advanced materials and final products research abroad, closer to the markets for this type of goods; they were active in the chemical and metal industries. Only one truly global corporation was found, with an international division of labor among its many foreign laboratories. The degree of autonomy varied across the three types of expatriate R&D units. In the last 10 years, the internationalization of industrial research and development has increased very rapidly. Foreign-affiliated corporations operating in the United States represented some 9.3% of all company-funded R&D in that country in 1987, and close to 18% in 1995 (Dalton and Serapio, in this issue). Similarly, foreign R&D expenditures by US-affiliated companies abroad have more than tripled. Canadian industrial R&D abroad has grown at a similar pace. It now includes over 100 research facilities owned by some 60 Canadian corporations, with subsidiaries in the United States, western Europe, Japan, Australia, and several developing countries (China, Brazil, India, Mexico, and Turkey). However, little is known about the characteristics of this foreign R&D: missions, managerial practices, budgets or innovative activity. This study is the first to present original data from a survey of these facilities, complemented by secondary material from annual reports and the financial and technical press. It follows a previous study of Canadian patents abroad, which concluded that diversification into related activities was the overseas strategy of Canadian multinational corporations (MNCs) with foreign R&D activities [Niosi, J., 1997. The globalization of Canadian R&D, Management International Review 37 (4) (in print).]. The first section of this paper presents (1) a short summary of some relevant literature on the management of foreign R&D, (2) the design of the study, (3) the results, and (4) a comparison of theories with Canadian data. It offers conclusions about the existence of three distinctive types of internationalization in Canadian R&D, each with different strategies and outcomes.     

Competition favors the prepared firm: Firms’ R&D responses to competitive market pressure

This paper aims to contribute to the literature on the long-debated relationship between market competition and firm research and development (R&D) by investigating the effect of competitive market pressure on firms’ incentives to invest in R&D. The paper shows that a firm's R&D response to competitive market pressure depends primarily on its level of technological competence or R&D productivity: firms with high levels of technological competence tend to respond aggressively (i.e., exhibit a higher level of R&D efforts) to intensifying competitive market pressure, while firms with low levels of technological competence tend to respond submissively (i.e., exhibit a lower level of R&D efforts). The differential effect of competitive market pressure on firm R&D, conditioned primarily by the level of firms’ technological competence, is empirically supported by unique firm-level data from the World Bank. Furthermore, the role of firm-specific technological competence in conditioning the R&D-competition relationship is more evident and statistically more significant for firms facing consumers whose utility is relatively more elastic to product quality than to price.     

R&D,foreign ownership,and corporate groups: Evidence from Japanese firms

This study empirically examines whether the research and development (R&D) activities of foreign-owned firms in Japan differ notably from the R&D activities of domestically-owned firms based on a firm-level panel dataset. Our study carefully disentangles the significant differences in R&D investment behavior of subsidiaries due to three different reasons: having a foreign parent, corporate group affiliation, and the degree of relatedness between business units. The results reveal the following. First, firms that are majority-owned by another firm are less active in R&D than independent firms. Second, foreign ownership does not matter if the parent firm is from a G7 country, but R&D intensity is significantly and positively associated with foreign ownership if the parent firm is from a non-G7 country. Finally, for subsidiaries whose business is related to that of their parent firm, the R&D intensity is lower if the parent is a domestic firm, but higher if it is a foreign firm. These findings imply that globalization and the integration of firms may not only affect production patterns and global supply chains, but may also have an important impact on the level of domestic R&D activities.     

Determinants of R&D cooperation in Japanese start-ups

This paper explores the determinants of R&D cooperation in Japanese start-ups. Using a sample from an original survey conducted in 2008, we examine the effects of founder-, firm-, and industry-specific characteristics on R&D cooperation by type of partners. Our findings indicate that founder-specific characteristics such as educational background, prior innovation output, and affiliation to academic associations are fairly important in determining R&D cooperation with academic institutes (universities and public research institutes). We also provide evidence that founders’ prior innovation output and work experience have positive and significant effects on R&D cooperation with business partners. With respect to firm-specific characteristics, it is found that firms investing more in R&D tend to engage in R&D cooperation, regardless of the type of partners. Furthermore, it is found that independent firms are less likely to cooperate in R&D with academic institutes than subsidiaries and affiliated firms.     

The impact of firm participation in R&D programmes on R&D partnerships

R&D subsidies designed to encourage innovation efforts by firms may have intended and unintended effects on the way they organize their innovation process. We present empirical evidence on how R&D subsidies affect firms’ R&D cooperation strategies. In particular, we investigate whether receiving public R&D subsidies affect the probability that a firm will set up an R&D partnership with a public research organization (PRO), or with other firms. Our main findings are: (i) public support significantly increases the chances that a firm will cooperate with a PRO, and (ii) public support also increases the likelihood that a firm will establish private partnerships, but to a smaller extent and only when firms have intangible knowledge assets. These results suggest that public R&D programmes trigger a behavioural change in firms’ R&D partnerships, alleviating barriers to cooperation.     

Knowledge integration in the shadow of tacit spillovers: Empirical evidence from U.S. R&D labs

Integrating knowledge across a firm's value chain (e.g. between R&D, marketing and manufacturing functions), which we denote “Knowledge Integration” (KI), has been consistently found to be a strong predictor of product innovation performance in the management literature. Such cross-functional integration does not occur by chance, but by design, as a result of managerial practices and organizational arrangements. The significant heterogeneity characterizing the diffusion of cross-functional integration across firms is suggestive of the well-known tension between internal and external diffusion of knowledge. In this paper, we argue that the hidden cost of KI is to expose firms to a higher risk of knowledge leakages and provide the first systematic empirical evidence of this apparent tension between internal and external knowledge flows. Based on data from the CMU Survey (one of the rare datasets offering observables on both sides of the tension for a representative set of R&D active firms in the US), we investigate the impact of knowledge spillovers to competitors on internal cross-functional knowledge integration involving the R&D function among manufacturing firms. We find that the intensity of (tacit) R&D knowledge spillovers at the industry-level has a negative and significant impact on the likelihood that firms adopt or achieve KI. Our results therefore suggest that firms may trade their optimal innovative performance against superior appropriability of their rents.     

R&D internationalization, R&D collaboration and public knowledge institutions in small economies: Evidence from Finland and the Netherlands

This paper investigates domestic and foreign innovating firms’ determinants of R&D collaboration with domestic universities and public knowledge institutes in Finland and the Netherlands. We put particular emphasis on the impact of incoming academic spillovers on the probability to co-operate with these public R&D institutes.Based on data from Community Innovation Surveys we find that foreign firms in the Netherlands are less likely to co-operate with domestic public knowledge institutions than domestic firms, while in Finland no significant difference can be detected. Another result is that incoming knowledge spillovers are an important determinant for R&D collaboration with domestic public knowledge institutions in both countries. In case of foreign firms in Finland, incoming knowledge spillovers affect the probability to co-operate with public knowledge institutions more positively compared to domestic firms. For the Netherlands no substantial difference could be found in this respect. Further, innovating firms in Finland that require academic or basic knowledge do not co-operate significantly more with public knowledge institutions than those that need applied knowledge. At the same time they are willing to share knowledge with public R&D partners. In the Netherlands innovating firms that require relatively more basic than applied knowledge, increase the probability of co-operation with Dutch universities and public knowledge institutions but there is reluctance to share proprietary knowledge with public R&D partners. For both countries no significant difference between foreign and domestic firms with regard to academic knowledge requirements could be found. This raises the issue whether Finnish innovation policies with a strong focus on R&D co-operation provide incentives for strategic behaviour by domestic public partners to put more emphasis on applied research.     

Differences in the rates of return to R&D for European and US young leading R&D firms

This paper examines the sources of Europe's lagging business R&D performance relative to the US, particularly the role played by missing young leading innovators in high technology intensive sectors in Europe. It investigates through econometric analysis differences in the rates of return to R&D of European and US large R&D firms. It finds that, while in the US, young firms succeed in realizing significantly higher rates of return to R&D as compared to their older counterparts, including in high-tech sectors, European firms fail to generate significant rates of return, even if they are Yollies and even if they are in high-tech sectors. These findings can at least partly explain why Europe has less R&D intensive young leading innovators in high technology intensive sectors.     

R&D manpower and technological performance: The impact of demographic and task-related diversity

We assess the impact of R&D manpower diversity on firms’ technological performance. Relying on insights from two theoretical perspectives on team diversity (i.e. social categorization perspective and information decision-making perspective), we hypothesize that both demographic and task-related sources of diversity within firms’ R&D workforce influence technological performance. In addition, we expect that these two dimensions of diversity interact with each other. To test our hypotheses, we rely on survey data from 938 Singaporean firms, providing in-depth information on three sources of demographic diversity (i.e. gender, age, and nationality of R&D employees) and two sources of task-related diversity (i.e. educational and knowledge area background of R&D employees). Our findings point to significant interactions between different sources of R&D manpower diversity. In particular, we identify substitutive relationships between (a) educational and gender diversity, and (b) nationality and knowledge area diversity.     

First- and second-order additionality and learning outcomes in collaborative R&D programs

In this paper, we distinguish between firm-level learning effects that result from ‘first-order’ and ‘second-order’ additionalities in innovation policy interventions. ‘First-order’ additionalities represent direct firm-level R&D subsidies, whereas ‘second-order’ additionalities result from knowledge spill-overs, horizontal knowledge exchanges between firms, and from other meso- or community-level effects. Analyzing data from collaborative R&D programs in Finland, we show that enhancing identification with a community of practice among R&D program participants (proxy for second-order additionality) enhances firm-level learning outcomes beyond those resulting from direct R&D subsidy (proxy for first-order additionality). Learning effects facilitated by second-order additionality are not confined to technological learning alone, encompassing also business and market learning. We also show that aspects of program implementation enhance identification with a community of practice, which then mediate the relationship between program implementation and firm-level learning outcomes.     

Multinationality, foreignness and institutional distance in the relation between R&D and productivity

This paper empirically examines to what extent being foreign and part of a multinational affects the endogenous relation between R&D and productivity. Our findings indicate that multinationals obtain in general higher R&D returns. Also, there is a negative foreignness effect in that domestic-owned multinationals outperform foreign subsidiaries. However, these effects are somehow moderated by the institutional distance between the home and host countries. These results, obtained for a panel of UK firms, are largely consistent with a set of hypotheses derived from the institutional and international business theories.     

Distributed R&D, cross-regional knowledge integration and quality of innovative output

We explore the impact of geographic dispersion of a firm's R&D activities on the quality of its innovative output. Using data on over half a million patents from 1127 firms, we find that having geographically distributed R&D per se does not improve the quality of a firm's innovations. In fact, distributed R&D appears to be negatively associated with average value of innovations. This suggests that potential gains from access to diverse ideas and expertise from different locations are, on average, offset by difficulty in achieving integration of knowledge across multiple locations. To investigate whether the innovating teams that do manage cross-fertilization of ideas from different locations achieve more valuable innovations, we analyze innovations for which there is evidence of such knowledge cross-fertilization along any of the followings dimensions: knowledge sourcing from other locations within the firm, having at least one inventor with cross-regional ties, and having at least one inventor that has recently moved from another region. Analysis along all three dimensions consistently reveals a direct positive effect cross-regional knowledge integration has on innovation quality, as well as a positive interaction effect of cross-regional knowledge integration and distributed R&D for innovation quality. More generally, our findings provide new evidence regarding the importance of cross-unit integrative mechanisms for achieving superior performance in multi-unit firms.     

R&D strategies and entrepreneurial spawning

This paper analyzes how different R&D strategies of incumbent firms affect the quantity and quality of their entrepreneurial spawning. When examining entrepreneurial ventures of ex-employees of firms with different R&D strategies, three things emerge: First, firms with persistent R&D investments and a general superiority in sales, exports, productivity, profitability and wages are less likely to generate entrepreneurs than firms with temporary or no R&D investments. Second, start-ups from knowledge intensive business service (KIBS) firms with persistent R&D investments have a significantly increased probability of survival. No corresponding association between the R&D strategies of incumbents and survival of entrepreneurial spawns is found for incumbents in manufacturing sectors. Third, spin-outs from KIBS-firms are more likely to survive if they start in the same sector, indicating the importance of inherited knowledge. These findings suggest that R&D intensive firms are less likely to generate employee start-ups, but their entrepreneurial spawns tend to be of higher quality.     

Secrets to shield or share? new dilemmas for military R&D policy in the digital age

The US Department of Defense (DOD) normally pursues a closed approach to technological development. It captures results from its own sponsored research and development (R&D), and the results are kept shielded by restrictions on related publications and exports. This R&D strategy is no longer viable. Now most military technology has commercial origins, the US no longer dominates all relevant technological fields, and sophisticated dual-use technology is accessible to adversaries in open global markets. DOD can address this dilemma by drawing on external R&D that tests a technology’s general capabilities against a variety of potential uses and by placing more of its internal emphasis on technology integration. Historically, this approach to military R&D also yields more commercial spin-offs.     

An audit of technological innovation capabilities in chinese firms: some empirical findings in Beijing, China

Recent studies have advocated different technological innovation capabilities (TICs) and discussed their impact on a firm’s competitive performance. This paper introduces a study framework of innovation audit and examines the relevance of seven TICs to building and sustaining the competitiveness of Chinese firms. Empirical data was acquired through a recent study of 213 Chinese firms in Beijing, China. Regression analysis was employed to examine the correlation between TICs and innovation rate, sales growth, and product competitiveness among these firms. The findings verify that R&D and resources allocation capabilities are the two most important TICs. A strong R&D capability could safeguard innovation rate and product competitiveness in large and medium-sized firms, whereas a resources allocation capability would enhance the sales growth in small firms. However, the impact of learning and organising capabilities on a firm’s innovation performance has yet to be investigated.The findings of this paper suggest that Chinese firms should consider a more balanced focus on their TICs’ harmonising enhancement. In order to maintain their sustainable development, effectively plan and implement their innovation strategies as well as enhance their whole innovation capability, Chinese firms should closely relate their TICs to the formulation of technology strategy and harmonisation of innovation and R&D activities.     

R&D synergy between local and foreign-owned enterprises in post-communist economies

This study examines how internal research and development (R&D), external knowledge acquisition, and R&D contracted with other companies interact in local and foreign-owned enterprises in post-communist economies. A large sample of firm-level data from the Business Environment and Enterprise Performance Survey (BEEPS) across 26 post-communist countries (including European Union (EU) members and non-EU states of Eastern Europe, Caucasian countries, and Central Asian countries) and country-level data from the Global Innovation Index and the International Property Rights Index were used. The findings show that enterprises with majority foreign ownership are relatively more likely to acquire external R&D. We demonstrate that the R&D behavior of enterprises with majority foreign ownership and local firms are interrelated, that is, we find a synergy effect. According to the results, decisions on internal R&D and the purchase of external knowledge for enterprises with majority foreign ownership are similar to those of local firms. However, enterprises with foreign ownership contract R&D with other companies more often if local firms conduct internal R&D. These results indicate the presence of knowledge spillover and cross-learning effects in both types of enterprises in post-communist countries. Finally, we find that the national innovation environment is not significant for the R&D intensity of enterprises with majority foreign ownership, which suggests their high dependence on the parent structures of multinational enterprises.