Abstract
Multinational firms investing in foreign R&D activities were examined as having two main concerns: protecting their existing technological competencies and developing new competencies. The proposition that they make strategic choices to deal simultaneously with both concerns was tested by analyzing published data on 348 R&D investments in China between 1997 and 2002. Investing multinationals were shown to prefer setting up wholly-owned R&D labs in regions with poor IPR protection and cooperative ventures where protection was more robust. Cooperative ventures were preferred in regions with poorly developed factor markets, and wholly-owned labs where factor markets functioned more efficiently. These findings are consistent with the idea that multinationals making such investments attempt to develop and protect their core technology assets by balancing entry mode choices against the location choice in terms of intellectual property protection and the level of factor market development in the host location.
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