Multinational knowledge spillovers with decentralised R&D: a game-theoretic approach

Abstract

This paper provides a theoretical model of the trade-offs that an MNE faces when organising its R&D as decentralised or centralised. R&D decentralisation avoids having to adapt centrally developed innovations to local markets, being able to use the specific know-how of the subsidiary. In addition R&D subsidiaries can be used to source locally available external know-how. At the same time, however, R&D internationalisation intensifies the spillover of valuable know-how to competitors located in the foreign markets. The analysis demonstrates the importance of the intensity of competition in the local market in determining the size of both the benefits and costs of R&D decentralisation. It shows that when R&D is undertaken abroad in association with production, the local knowledge base is not unequivocally a pulling factor attracting R&D investments by foreign MNEs, depending on the level of local competition. The paper also shows that efficiency in reverse intra-company technology transfers is a critical factor in benefiting from technology sourcing. The results thus illustrate the complementarity of efficient internal and external knowledge management systems. In addition the model suggests that, with a fall in the cost of intra-company technology transfers, relative market size loses importance as a locational factor for R&D decentralisation. Journal of International Business Studies (2007) 38, 47–63. doi:10.1057/palgrave.jibs.8400249

Strategic R&D internationalisation in developing Asian countries - the Italian experience

“…Over this period, the number of studies on the topic visibly increased consequent to the corresponding research on the drivers enhancing the phenomenon. These drivers, directly related to overseas innovative activity and so to the internationalisation of R&D were identified as being: high income and market size (Ekholm and Midelfart, 2004;Blonigen, 2005;Jensen, 2006), the presence of skilled workforce and the quality of the education system (Ernst, 2006;Thursby and Thursby, 2006;Hedge and Hicks, 2008;Kinkel and Maloca, 2008;Lewin et al, 2009;European Commission, 2010), the knowledge spillovers (Belderbos et al, 2009;Dachs and Pyka, 2010), differences in labour cost (Booz Allen Hamilton and INSEAD, 2006;Thursby and Thursby, 2006;Kinkel and Maloca, 2008;Belderbos et al, 2009;Cincera et al, 2009;European Commission, 2010), geographical proximity between host and home country investments (Guellec and van Pottelsberghe de la Potterie, 2001;von Zedtwitz and Gassmann, 2002;Gersbach and Schmutzler, 2006;Sanna-Randaccio and Veugelers, 2007;Dachs and Pyka, 2010), strategic redevelopment to fit contemporary business contexts Chebbi et al, 2013) and public policy (Dachs et al, 2005;UNCTAD, 2005;CREST Working Group, 2007;OECD, 2008a;TAFTIE, 2009;Verbeek et al, 2009, Schwaag Serger andWise, 2010).…”

Looking Ahead: Part III

“…Finally, a growing stream of papers has demonstrated that the behavior of MNEs -which are typically active in oligopolistic markets -is crucially influenced by strategic interaction with various stakeholders like rival firms, input suppliers, and regulators (e.g. Kopel et al 2015;Head et al 2002;Leahy and Pavelin 2008;Leahy and Montagna 2009;Alcácer et al 2013Alcácer et al , 2015Sanna-Randaccio and Veugelers 2007;Belderbos et al 2008;Wu and Zhang 2014).…”

International Business Research and Game Theory: Looking beyond the Prisoner's Dilemma

“…Organization literature and showed its applicability to MNE topics in International Business 14 (see Sanna-Randaccio and Veugelers, 2007). There is even more of a potential for IB when considering commitment, reputation and internal relationships in MNEs.…”