Whither geographic proximity? Bypassing local R&D units in foreign university collaboration

Abstract

MNCs often engage in international research collaborations with foreign universities through one of their central R&D laboratories (at headquarters or elsewhere) even though they operate a local R&D unit close to that university, and hence forego the benefits of geographic proximity and local collaboration. Drawing on the knowledge-based theory of the firm, we hypothesize that the choice between distant and local collaboration systematically relates to the knowledge capabilities of the firms’ R&D units, the characteristics of the focal knowledge, and local knowledge leakage risks. Analysis of close to 13,000 research collaborations with foreign universities by the world’s major biopharmaceutical firms (1995–2015) confirms that collaboration at distance occurs if this allows the firm to benefit from scale and knowledge diversity advantages, if the central unit has strong basic research capabilities, and if collaboration is in a core research domain of the MNC while rival firms are locally present. Maturity of the focal research domain is associated with local collaboration. Our findings qualify the common arguments in favor of collaboration in proximity and suggest that (distant) central R&D units are important orchestrators of research collaboration with universities around the globe.

Multinational firms and the quest for global talent: Employing (skilled) foreign workers at home and abroad

“…We do however note that we find relatively smaller effects for this human capital substitution mechanism, presumably because not all firms have the capacity to globally coordinate individual employment decisions at home and abroad. Our findings on the role of contextual distance inform work on the importance of such distance in foreign investment decisions (Belderbos et al, 2021) and studies on the benefits of cultural diversity (Laursen et al, 2020). We confirm the notion that MNEs face higher costs and complexity of conducting operations in and in exchange with countries exhibiting greater contextual distance.…”

“…Language differences involve the distance in major languages between two countries (Dow & Amal, 2006). The literature has subsumed differences in culture, institutional context and language into a composite concept termed 'contextual distance' (Belderbos, Grabowska, Kelchtermans, Leten, Jacob, & Riccaboni, 2021;Beugelsdijk et al, 2017). Given the stronger needs to employ migrants in the MNE's home country to expand foreign employment in contextually distant locations, contextual distance is likely to be associated with a stronger complementary relationship between the growth of domestic and foreign employment of foreign workers.…”

“…We measure contextual distance as a principal component of institutional distance, cultural distance, and language distance, following prior studies (e.g., Belderbos et al, 2021) Dow and Amal (2006) and represents the closeness between languages and the frequency that the language of one country is spoken in the other country.…”

How does basic research improve innovation performance in the world’s major pharmaceutical firms?

“…Fifth, we include an indicator that captures the involvement of firms in R&D collaborations. By collaborating with external parties, firms can get access to complementary knowledge (Belderbos et al 2021;Du, Leten, and Vanhaverbeke 2014;Faems, Van Looy, and Debackere 2005;Belderbos, Carree, and Lokshin 2004) and may improve their innovative performance. We identify collaborations using the Thomson Reuters RECAP database, which includes information on transactions (including collaborations) in the life sciences industry.…”

Managing Knowledge Towards Firm Performance: The Moderation Role of the Business Environment

“…Service firms have been found to be leveraging on external knowledge for their innovation than manufacturing firms (Mina et al, 2014). The search for external knowledge is also influenced by several factors such as proximity (Belderbos et al, 2021) and cost (Mina et al, 2014). While firms are likely to cooperate with other firms closer to them for external knowledge, it is important to note that, the search for external knowledge is not costless.…”