Strategic R&D Location in European Manufacturing Industries

K.U. Leuven MSI Working Paper No. 0603

25 Pages Posted: 14 Nov 2006

See all articles by René Belderbos

René Belderbos

University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation; Maastricht University - Department of Organization & Strategy

Elissavet Lykogianni

KU Leuven - Faculty of Business and Economics (FEB)

Reinhilde Veugelers

Catholic University of Leuven (KUL) - Department of Applied Economics; Centre for Economic Policy Research (CEPR)

Date Written: November 2006

Abstract

We develop and empirically test a model of foreign R&D investments that takes into account strategic interaction in R&D location decisions by multinational firms in the context of R&D spillovers and foreign technology sourcing strategies. In a two-country, two-firm model with cross investments, the optimal share of R&D performed abroad depends on the efficiency of intra-firm international technology transfer, the degree of inter-firm R&D spillovers, the intensity of product market competition, and the importance of the general knowledge pool. The impact of these factors differs markedly between technology leading firms and technology laggards. We find support for most of the predictions of the model in an empirical analysis of patents based on innovations in foreign countries by 131 leading European manufacturing firms in 22 ISIC industries in 1996-1997. For technology leaders, the share of patents originating in other EU countries responds positively to host country product market competition and is strongly increasing in the level of intellectual property rights protection. Foreign R&D by technology laggards is discouraged by host country competition but increases with the efficiency of (reverse) technology transfer. Foreign R&D of both leaders and laggards increases with the size of the local knowledge pool and the size of production operations in the host country.

Keywords: Competition, Country, Decision; Decisions, Efficiency, Empirical analysis, Factors, Firms, Impact, Industries, Industry, Innovation, Innovations, Intellectual property, Intensity, Interfirm R&D, International, Investment, Investments, Knowledge, Manufacturing, Manufacturing firms, Market, Model, Mul

JEL Classification: D21, F23, L16

Suggested Citation

Belderbos, Rene and Lykogianni, Elissavet and Veugelers, Reinhilde, Strategic R&D Location in European Manufacturing Industries (November 2006). K.U. Leuven MSI Working Paper No. 0603 . Available at SSRN: https://ssrn.com/abstract=944738 or http://dx.doi.org/10.2139/ssrn.944738

Rene Belderbos (Contact Author)

University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation ( email )

Naamsestraat 69
Leuven, B-3000
Belgium
+32 16 32 6912 (Phone)
+32 16 32 6732 (Fax)

Maastricht University - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Elissavet Lykogianni

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Reinhilde Veugelers

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 16 32 6908 (Phone)
+32 16 32 6732 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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