Foreign direct investment in industrial research in the pharmaceutical and electronics industries-results from a survey of multinational firms

Abstract

Summary form only given. This paper examines motives, location characteristics, inter-temporal characteristics and modes of entry for foreign direct investment (FDI) in research and development (R&D). The paper is based on a detailed empirical survey of laboratory sites established by 32 large multinational companies. The sample consists of 10 US firms, 12 Japanese firms and 10 European firms. 19 out of the 32 firms are Fortune Global 100 firms and thus among the largest in their industry. The empirical survey consisted of extensive archival research, a questionnaire survey and at least 2 interviews with senior executives in each company. Through this approach it was possible to establish a detailed history for each of 238 R&D sites established by these 32 firms. The data set on which the paper is based is one of the largest of its kind. The paper uses tabulation devices as well as statistical tests to describe and evaluate various aspects of FDI in R&D. Findings are compared to results obtained by other researchers and differences and similarities are discussed. The paper finds that FDI in R&D has risen considerably over the last 40 years and that firms invest primarily in industrialized countries. We also find that firms invest in R&D sites abroad for two reasons, either in order to acquire new knowledge and augment the firm's home base or in order to apply existing knowledge to local markets and manufacturing facilities and thus to exploit the firm's knowledge base.