The it Revolution and the Globalization of R&D

28 Pages Posted: 18 Jun 2018

See all articles by Lee Branstetter

Lee Branstetter

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; National Bureau of Economic Research (NBER)

Britta Glennon

Wharton School, University of Pennsylvania

J. Bradford Jensen

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy; Peter G. Peterson Institute for International Economics

Date Written: June 2018

Abstract

Since the 1990s, R&D has become less geographically concentrated, and has seen especially fast growth in emerging markets. One of the distinguishing features of the R&D globalization phenomenon is its concentration within the software/IT domain; the increase in foreign R&D has been largely concentrated within software and IT-intensive multinationals, and new R&D destinations are also more software and IT-intensive multinationals than traditional R&D destinations. In this paper we document three important phenomena: (1) the globalization of R&D, (2) the growing importance of software and IT to firm innovation, and (3) the rise of new R&D hubs. We argue that the shortage in software/IT-related human capital resulting from the large IT- and software-biased shift in innovation drove US MNCs abroad, and particularly drove them abroad to “new hubs” with large quantities of STEM workers who possessed IT and software skills. Our findings support the view that the globalization of US multinational R&D has reinforced the technological leadership of US-based firms in the information technology domain and that multinationals’ ability to access a global talent base could support a high rate of innovation even in the presence of the rising (human) resource cost of frontier R&D.

Suggested Citation

Branstetter, Lee and Glennon, Britta and Jensen, J. Bradford, The it Revolution and the Globalization of R&D (June 2018). NBER Working Paper No. w24707, Available at SSRN: https://ssrn.com/abstract=3198009

Lee Branstetter (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Britta Glennon

Wharton School, University of Pennsylvania

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Philadelphia, PA 19104
United States

HOME PAGE: http://brittaglennon.com

J. Bradford Jensen

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy ( email )

Washington, DC 20057
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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