How global is R&D?
Determining when to internationalise and when to stay at home
While multinational firms are increasingly internationalising their R&D activities, a major portion of corporate R&D still tends to be concentrated in a firm’s home country. Professors Bart Leten (Vlerick Business School and KU Leuven), Rene Belderbos (KU Leuven), and Shinya Suzuki (NISTEP) have examined 156 major R&D intensive firms based in Europe, the US and Japan to determine the factors that bias a company towards locating its R&D activities in its home country.
The authors’ first finding is that R&D is less global than the academic and business literature on the growing importance of international R&D would indicate. Their research showed that almost all of the firms they studied conduct more R&D at home than one would expect from the relative attractiveness of their home countries.
At the same time, the authors find substantial heterogeneity in the home R&D bias among firms based in the same country. For example, the home bias is greater when:
- Economies of scale and scope are important in technology development;
- R&D activities are strongly embedded in the innovation system of the firm’s home country;
- The costs of coordination and communication with foreign affiliates in global R&D activities are high due to locational factors.
Furthermore, technology leaders have a stronger home country bias when their home country has a strong level of IPR protection, allowing for effective centralized IP management and reducing the risk of knowledge dissipation abroad.
Although access to geographically dispersed local scientific and technological expertise is an obvious advantage to internationalising R&D, the authors urge managers to pay attention to the costs and risks of dispersing their R&D activities. Depending on the configuration of locations and the characteristics of technologies, the costs of coordinating geographically dispersed R&D activities may reduce or outweigh the benefits that firms expect to realise.
Source: How Global is R&D? Firm-Level Determinants of Home-Country Bias in R&D by Rene Belderbos, Bart Leten, and Shinya Suzuki, Journal of International Business Studies, 2013 (forthcoming).