Internationalisation of Corporate Technology: What we know and don’t know?

Pari Patel

SPRU, University of Sussex

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Context

“.. internationalisation of R&D and technology is a phenomenon with many dimensions but with - after all - few available observations so far, ... leaving ample room for uncertainty and speculation.”

Granstrand (1992)

What have we learnt since then?

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Outline

Academic and policy relevance Measures: Sources, Strengths and

Weaknesses Main Results: How Much? Where? In

Which Technical Fields? Type of Activity?

Future Research : What we don’t know

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Relevance

• Debates about the nature and importance of foreign R&D.

• Fears about ‘Hollowing out’.

• Fears about ‘Free-riding’ by foreign firms.

• Management of technology within firms.

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Purpose, Scale & Major Determinant of Foreign Technological Activities.

Purpose Scale Major Determinant

Adapting products, processes & materials; providing technical support.

Small Scale of Host Market

Monitoring scientific and technological developments

Small Quality & Scale of the Host Country S & T

Generating entirely new products & core technologies outside the home country

Large Quality & Scale the Host Country S & T plus Cost Advantages

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MEASURE STRENGTHS WEAKNESSES Sources

Research and development 

Regular and recognised data on main source of technology

Lacks detail and Strongly underestimates design, production engineering, and software

OECDNSFUK R&D Scoreboard

Patents 

Regular detailed & long-term data available by firm, location, industry, technical fields

Uneven propensity to patent amongst countries, sectors and companies; misses software

US PTO EPO 

Innovation Surveys

Systematic data on innovative activities of foreign firms 

Not all countries report nationality of company

National Sources

Other Ad Hoc Surveys

Detailed data, e.g. on motivations for conducting foreign R&D 

Uneven coverage Various

Main Measures

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Latest Results on Internationalisation of Technology:1996-2000

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Changes in Internationalisation of Technology: 1985 to 2000

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Internationalisation of Technology by Industry: 1996-2000

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Importance of Foreign Firms in National Technology: 1996-2000

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Importance of Foreign Firms in National Technology: 1996-2000

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Comparing Company Vs Host Country Advantages Analysis of 220 Firms at forefront of internationalisation, distinguishing between technical fields in which:

Company is weak at home and the location is strongCompany is strong at home and the location is weakCompany is strong at home and the location is strongNeither a home advantage nor a locational advantage

Main Results:

in 75% of cases companies are engaged in foreign activities in technical areas where they have built up strength at home.

largest increases (esp. for EU Firms) have been in technologies where there are complementary strengths between the company and the 'host' country.

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Summary: Stylized Facts

• European firms (esp. those from smaller countries) more internationalised than US or Japanese firms.

• European firms greatly increased their foreign activities in 1990s, especially in the US.

• Foreign large firms are important contributors to European technology, esp. in Chemicals and Electronics.

• Japanese firms least internationalised & Japan least favoured location.

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Summary: Stylized Facts (Contd.)

• Very little activity located outside Europe and the USA.

• Degree of Internationalisation is not positively associated with R&D Intensity of the Industry or the firm.

• Recent increases have been in technologies where there are complementary strengths between the domestic activity of a company and the host country.

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Why do Firms Concentrate their Technological Activities at Home?

Launching of a brand new product (when there is a great deal of uncertainty regarding product and process parameters) requires:

• Strong linkages with suppliers and customers

• Strong linkages with local basic research in Universities and other public sector institutes.

• Strong intra-corporate linkages between R & D, production and marketing

Strong Home Country Biases in these linkages

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Some Explanations for Increasing Internationalisation

• Constraint of Size of the country (lack of specific skills and of advanced users to test major innovations).

• Large firms need to master increasing range of technologies.

• Overcome weaknesses in the national science base.

• Increasing liberalisation leading to greater flows of FDI.

• By-product of other business strategies.

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What we don’t know

• Relationship between internationalisation and economic performance.

• Motives for EU firms conducting their R&D in the US.

• How much can be explained by M&A?

• Linkages between foreign firms and the National Science Base.