Do subsidiaries of foreign MNEs invest more in R&D than domestic firms?
Despite the growing involvement of multinational enterprises (MNEs) in foreign-based research and development (R&D), there has been little research comparing R&D investments of subsidiaries of foreign MNEs to domestic firms. Subsidiaries of foreign MNEs enjoy advantages that help them compete against domestic firms. However, when deciding on R&D investments, these advantages exert competing influences on their R&D investment decision. On the one hand, better access to and transfer of knowledge and technologies from the MNE and other subsidiaries and centers of excellence may encourage the subsidiary of a foreign MNE to invest less in R&D relative to a domestic firm. On the other hand, better access to sources of capital through the MNE and other subsidiaries may induce the subsidiary to invest more in R&D in comparison to domestic firms. We find that subsidiaries of foreign MNEs invest less in total R&D than domestic firms. The reason is that they invest less in external R&D than domestic firms; however, they have similar internal R&D investments compared to domestic firms. These findings support the notion that the transfer of technology and knowledge from other parts of the MNE acts as a substitute for the purchase of external R&D while internal R&D acts as a complement to the technology and knowledge transferred from other parts of the MNE.
Year of publication: |
2008
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Authors: | Un, C. Annique ; Cuervo-Cazurra, Alvaro |
Published in: |
Research Policy. - Elsevier, ISSN 0048-7333. - Vol. 37.2008, 10, p. 1812-1828
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Publisher: |
Elsevier |
Keywords: | R&D investment Subsidiaries of foreign firms Domestic firms Multinational firms |
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