Foreign direct investment and industry-science R&D cooperation: the case of South Africa

Abstract

ABSTRACT We use the South African National Innovation Survey to analyse the firm and industry characteristics that determine R&D collaboration with knowledge institutions. Besides examining the complementarity among innovation activities, we particularly focus on the complementarity between R&D collaboration and the internationalization of production. Consistent with the asset exploiting motive for outward FDI, we find that firms that established a subsidiary abroad are more likely to engage in cooperative research agreements with universities or public research organizations. Hence, inducing domestic firms to enter into foreign markets will enhance R&D cooperation with knowledge institutions in the home country. Furthermore, R&D collaboration is a complementary innovation strategy to the use of publicly available information and to engaging in cooperative research agreements with suppliers or customers. We also find that firms providing knowledge-intensive services such as (medical) R&D, ICT, and engineering services and firms in the chemical industry are more likely to engage in cooperative research agreements with knowledge institutions. Finally, in contrast to findings from studies in more advanced countries, we find that appropriability concerns may form a barrier preventing R&D collaboration with scientific organizations. Hence, improvements in the protection of intellectual property rights may foster industry-science R&D partnerships.