Research versus development: global cities and the location of MNCs’ cross-border R&D investments

Abstract

Large, internationally connected cities are important hubs of innovative activity, yet research on the attractiveness of such 'global' cities for research and development (R&D) activities by multinational corporations (MNCs) is scarce. We posit that factors determining cities' potential to attract R&D investments by MNCs differ depending on the type of R&D investments: research or development. We investigate the heterogeneous determinants of location choices for 1537 cross-border R&D investments by 633 MNCs in 55 global cities during the period 2003-12. The findings suggest that cities' technological and university strengths are stronger attracting factors for research activities, while global cities' market potential and intellectual property rights protection attract investments in development activities. Implications are discussed.

Guest editorial: FDI and cities: city location attractiveness for FDI, the dynamics and co-evolution of FDI and urban development

“…Studies have found global cities to attract investment in strategic and knowledge-intensive assets, including headquarters and R&D functions (Belderbos et al , 2017; Du et al , 2022; Du and Williams, 2017). They possess academic and technological strengths that attract early-stage research activities, not just later-stage development and sales activities (Du et al , 2022). Global city connectivity – the connections among cities built through infrastructure and organizational ties – plays a very important role in attracting FDI (Belderbos et al , 2017).…”

“…Global cities are knowledge and innovation hubs. Studies have found global cities to attract investment in strategic and knowledge-intensive assets, including headquarters and R&D functions (Belderbos et al , 2017; Du et al , 2022; Du and Williams, 2017). They possess academic and technological strengths that attract early-stage research activities, not just later-stage development and sales activities (Du et al , 2022).…”

“…A third direction for future research concerns how cities foster corporate international entrepreneurship following the initial investment. Prior studies have highlighted that global cities are hubs of knowledge and innovation, attracting knowledge-intensive (R&D) activities (Du et al , 2022; Castellani et al , 2022) and how global cities’ co-invention linkages stimulate innovation (Belderbos et al , 2022). However, there is a lack of attention to the role of cities in fostering corporate international entrepreneurship in the months and years following the initial investment.…”

“…According to a report by KPMG and the Greater Paris Investment Agency in 2018, the top 35 global cities attracted nearly 45% of the world’s total FDI in 2017 (Beaudouin et al , 2018; Chakravarty et al , 2021). The attractiveness of global cities has been ascribed to economic and contextual factors such as skilled labour, economic growth, corporate tax rates, a cosmopolitan environment, ethnic and cultural diversity, connectivity and a strong knowledge base that allow firms to access important markets and superior infrastructure (Belderbos et al , 2017; Du et al , 2022; Castellani et al , 2022).…”

World City Innovation and Service Networks and Economic Growth

“…Given that producer services entail a heavy focus on banking, insurance, accountancy, law, advertising, and consulting, they contribute relatively little to R&D and innovation and vice versa. Producer services firms often primarily serve multinational clients (Belderbos et al, 2017), while co‐inventor networks are more diverse and leverage expertise in different locations to enhance knowledge development and innovation outcomes (Capone et al, 2021; Du et al, 2022; van der Wouden, 2020). With increasing inter‐city competition for excellence in these domains, a city's specialization in one of these networks may allow for stronger agglomeration effects and a greater value of network involvement for the economic growth of the city.…”