Global Knowledge and R&D Foreign Direct Investment Flows: Recent Patterns in Asia Pacific, Europe, and North America

Abstract:     
The global nature of foreign direct investment (FDI) is changing in terms of both location and sectors of activity. This paper analyses recent flows of R&D FDI across the globe. It is found that North America has been the source of one-half of all R&D FDI between 2002 and 2005. Asia Pacific, especially China and India, has been the overwhelming destination for most R&D FDI, accounting for more than one-half of all investment and almost three-quarters of the jobs created. In general, R&D FDI has not been equitably spread across nations such as India and China but concentrated in a small number of locations. R&D FDI from advanced economies is facilitating the emergence of new centres and clusters of knowledge across the globe. This global redistribution of knowledge brings challenges to policymakers in both the developed and the developing world. The challenges come in two main forms: first, cross-regional disparities in knowledge-based wealth creation within particular nations; and second, anxieties about the offshoring of knowledge-based tasks and jobs. It is argued that current patterns of global knowledge flow require policies to nurture the open regional innovation systems being established by these flows.

Keywords: Foreign direct investment (FDI), research and development (R&D), knowledge flows, knowledge clusters, China, India

JEL Classification: O18, O2, O3

Accepted Paper Series