Abstract
Developing economies such as China are rapidly moving from the periphery to the centre of the global economic system. Among many indicators that illustrate this trend, one is particularly telling: a rapid increase in foreign multinationals' research and development (R&D) activities in these economies. No other developing economies come even close to China in terms of the amount and quality of such activities. Some multinationals are performing cutting-edge R&D in China. Moreover, some products developed in Chinese R&D labs are being first introduced in China and other Asian countries before being launched in Europe and North America. This chapter examines the characteristics that affect the amount and quality of multinational R&D activities in a host country. Building on the model, we analyse foreign technology firms' R&D operations in China.
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