Location choices within global innovation networks: the case of Europe

Rapid growth in internationalization of corporate R&D has spurred considerable interest since the 1990s. Foreign R&D is still mainly driven by the expansion of international production, but technology sourcing has become an increasingly important driver of dispersion. Actually, differences across sectors and companies tend to obscure the mix of motivations behind the development of global innovation networks. This paper distinguishes the various drivers of the international dispersion of corporate R&D in order to elaborate a typology of foreign R&D units, including in emerging countries. This typology is used to discuss the emergence of differentiated global innovation networks and the location choices by type of R&D unit. It is applied to foreign R&D projects in Europe in high and low cost countries between 2002 and 2005. It is then used to discuss the weakening attractiveness of the European Union for R&D activities and the relevant policies that countries can design to attract different types of units.

Innovation-related data in bureau of economic analysis international economic surveys

This paper describes innovation-related data available from international economic surveys conducted by the U.S. Bureau of Economic Analysis. These data are collected in conjunction with the international transactions accounts of the United States and in surveys of the operations of multinational companies (MNCs). The paper focuses on five innovation-related series: receipts and payments of royalties and license fees; exports and imports of research, development, and testing services; sales of services by foreign affiliates classified in the research and development services industry; MNC R&D spending; and MNC R&D employment.

Geographic and technological R&;D spillovers within the triad: micro evidence from US patents

This paper aims at assessing the magnitude of R&D spillover effects on large international R&D companies’ productivity growth. In particular, we investigate the extent to which R&D spillover effects are intensified by both geographic and technological proximities between spillover generating and receiving firms. We also control for the firm’s ability to identify, assimilate and absorb the external knowledge stock. The results estimated by means of panel data econometric methods (system GMM) indicate a positive and significant impact of both types of R&D spillovers and of absorptive capacity on productivity performance.

Tax incentives for innovation: time to restructure the R&;E tax credit

The R&E tax credit has never been effective and subsequent attempts to restructure it have not addressed the major deficiencies. Moreover, in the 25 years since the R&E tax credit was enacted, a steadily increasing number of countries have implemented or expanded competing tax incentives, which in many cases are better structured and larger in size. As a result, the relative impact of the US credit is now negative in terms of incentives to conduct R&D within the domestic economy. The inadequacy of the credit stems largely from its small size and its incremental format. The impact of an R&D tax incentive is affected by its scope of coverage, the ability of industry to take advantage of it over the entire R&D cycle, the magnitude of the incentive relative to other nations’ tax policies, and its ease of implementation. In the end, a tax incentive must sufficiently lower the user’s cost of R&D to overcome barriers to allocation of private-sector resources commensurate with the potential rates of return on such investments. As a policy instrument, a tax incentive for R&D should be most effective if its form is a flat rate applied to all R&D.

Internationalisation of R&D and embeddedness: the case of Austria

Internationalisation of corporate R&D—driven mainly by multinational enterprises (MNEs)—has received increasing interest recently. As a small open economy, Austria faces special challenges with regard to this on-going process. The share of Austrian R&D financed from abroad is outstanding in international comparison. Indeed, a significant portion of R&D activities in Austria is defined by strategic decisions of international corporations, which are re-assessing their spatial division of labour continuously. In our paper, we analyse the characteristics of these foreign-owned corporations in Austria and demonstrate that they form the more ‘modern’ part of Austrian industry. At the same time, we show that these companies and R&D facilities are embedded in the Austrian national innovation system (NIS) to a large extent. This embeddedness is also explicitly and implicitly supported by the Austrian technology policy. We conclude that this high degree of embeddedness in the NIS may be crucial for the sustainability of foreign-owned R&D facilities.

Government strategies to attract R&D-intensive FDI

Competition among countries to attract the research and development (R&D) activities of multinational enterprises has increased substantially during the last years, but the strategies used by governments in this competition still remain largely unexplored. This paper addresses that gap by proposing a taxonomy of the policy instruments available to stimulate inward R&D-intensive foreign direct investment (FDI) and presenting the results of a comparative case study of two EU countries: Spain and Ireland. The main conclusion is that an efficient promotion of R&D-intensive FDI calls for a closer connection between innovation policy and inward investment promotion, which are two policy areas that have traditionally operated rather separately. In addition, investment promotion agencies targeting R&D-intensive FDI are advised to reconfigure the scope of services they provide by placing more emphasis on after-care, since R&D-intensive FDI tends to be evolutionary rather than purely greenfield.

Expanding the R&;E tax credit to drive innovation,competitiveness and prosperity

The research and experimentation (R&E) tax credit has long been the subject of criticism. Some argue that if the goal is more research and innovation, it’s better to increase direct federal funding of research. Others argue that the credit is not effective, that companies would do the research in any case. Some object the very notion of using tax policy to influence private sector behavior, preferring instead a more “neutral” tax code. Still others, including Tassey in this volume, point to what they see are a host of design flaws in the current credit, including that its incremental nature reduces its effectiveness. I will argue here that most of these arguments are mistaken. To promote innovation in a global economy both direct funding and indirect tax incentives are needed. The credit, while it can be improved, has been shown to be effective in stimulating research. Moreover, far from distorting the market, the credit corrects for a market failure where firms are unable to capture all of the benefits of corporate research, leading them to under invest in research. Finally, while reform and expansion are needed, it would be a mistake to shift to a completely flat credit. However, several important changes should be made including doubling the current value of the credit, modifying the Alternative Simplified Credit to become incremental, and expanding the flat credit for collaborative R&D.

Research spending under regulatory uncertainty

Using a simple model this paper examines firm behavior under three types of uncertainties dealing with innovation occurrence, innovation scale, and a possible threat of regulatory action. Firms compete in the existing product market and engage in R&D in Stage I. Innovation takes place in the second stage, the successful firm achieves a monopoly and becomes aware of the scale of innovation. Regulators examine the new product and decide on possible action. Results show that increases in the probability of regulation reduce research spending as do higher regulatory taxes. These results are reversed when the regulator grants a subsidy, instead. An increase in the probability of drastic innovation increases research spending under certain conditions. The effect of market entry is unclear. Our results generally carry through when the model is extended to include only an innovation race or the nondrastic innovation is alternately regulated. Policy implications are discussed.

Foreign investment innovation: a review of selected policies

Whereas foreign investment innovation (FII) has become increasingly common, after decades of debate it is still unclear whether it is desirable for the home country or for the company’s host country. This paper reviews articles from three complementary economic and business traditions which investigate this phenomenon and propose policies based on facts: the economics of technological change tradition, the international business (IB) tradition, and the line of research on international technology transfers. Articles in line with these strands of theory complement each other because they approach different aspects of complex events while explaining FII and its effects on host and home countries. Host countries obtain maximum benefits from FII when affiliates import foreign technology, purchase their inputs in the host country and enjoy product and technological autonomy vis-à-vis the parent. Different types of MNEs, affiliates and foreign R&D units have different potentials for transferring technology to host countries and provide different scope for policies. The authors recommend that governments encourage direct vertical linkages between MNEs and domestic suppliers who could reap the benefits from foreign knowledge. However, some important success factors remain exogenous to governments. As for indigenous MNEs, it is a matter of controversy whether governments should always stimulate them to conduct research in foreign locations or, alternatively, incentive them to stay at home. The need for additional evidence is still considerable in many respects.

Organisational change and innovation system dynamics: the reform of the UK government defence research establishments

Since the end of the Cold War, ministries of defence in Europe and the United States have sought new models for the management of government defence research laboratories. The United Kingdom’s reform and subsequent privatisation of its government defence research establishments (GDREs) represents one of the most radical policy responses. This paper considers the UK case through the lens of innovation systems theory and uses defence labs reform to examine the impact of organisational change on the dynamics of an innovation system. The potential policy implications for the management of government defence research laboratories are also considered.

Strategic spin-off: a new incentive contract for managing R&D researchers

Innovation is a strategic challenge for high-tech companies and as such, justifies large investments in R&D. After exploring the limits of the underlying postulates of the organizational management of innovation (the necessary specialisation of researchers, the possibility of human discontinuity of innovation and possibility of controlling researchers), the objective of this paper is to show that the relationship between managers and researchers is characterised by asymmetric information (Laffont , J. J. (1985). Economie de l’incertain et de l’information, Economica.) to the benefit of the researchers. This asymmetry supposes the setting up of management practices which incite researchers to optimise the company’s interests, but this can only be done to at the expense of management control. In R&D activities, the informational asymmetry in agency relationship can be overcome by incentive managerial practices (Jensen, M. C., & Meckling, W. H. (1976) Theory of the firm: managerial behavior, agency cost, and ownership structure. Journal of Financial Economics, 3(4), 305–360.). The relationship between the manager (principal) and the researcher (agent), can be resolved by setting up the practice of strategic spin-off. This practice which enables a researcher to create a company based on work that he himself has carried out within the R&D department of his “mother” company, constitutes both an economic incentive (through the status of shareholder) and a symbolic one (through the status of entrepreneur). The incentive is strong for the researcher both to reveal his information and to obtain financial value from his research. Implementing this incentive contract means putting into place certain managerial and organisational practices designed to accompany the researcher–entrepreneur: (training, incubator, venture-capital structure etc.). The practice of strategic spin-off is beginning to emerge in high tech enterprises. This is why we have chosen to make an in-depth case study of the French company most involved in strategic spin-off, namely France Telecom.

The survey of industrial R&;D—patent database link project

This article details the construction of a firm-year panel dataset combining the NBER patent dataset with the Survey of Industrial R&D conducted by the Census Bureau and National Science Foundation. The dataset constitutes a platform that offers an unprecedented view of the R&D-to-patenting innovation process and a close analysis of the strengths and limitations of the R&D survey. The files are linked through a name-matching algorithm customized for uniting the firm names to which patents are assigned with the firm names in the Census Bureau’s SSEL business registry. Through the Census Bureau’s file structure, R&D can be linked to the operating performances of each firm’s establishments, further facilitating innovation-to-productivity studies.

Towards systematic knowledge building: An anti-crime research and development continuum

This response argues that the National Research Council (NRC) report, while valuable and thorough, would have benefited from conceptualizing evaluation activities along a continuum of knowledge development, with evaluations initially verifying the effectiveness of program concepts, before moving to evaluations of the feasibility and generalizability of anti-crime strategies and, finally, to evaluations of the costs and benefits of implementation of new strategies.

Advancing measures of innovation in the United States

This paper introduces major themes addressed in this special issue, which is based on NSF's Division of Science Resources Statistics (SRS) workshop Advancing Measures of Innovation—Knowledge Flows, Business Metrics, and Measurement Strategies, held on June 6-7, 2006 near Washington, D.C. The first two sections describe the workshop and provide a brief background on R & D and innovation metrics. The last section introduces the papers. They are based on selected workshop presentations along with additional invited papers.

Do specific forms of university-industry knowledge transfer have different impacts on the performance of private enterprises? An empirical analysis based on Swiss firm data

This study investigates the impact of a wide spectrum of Knowledge and Technology Transfer (KTT) activities (educational and research activities, activities related with technical infrastructure, and consulting) on two innovation indicators (a) in the framework of an innovation equation with variables for specific forms of KTT activities as additional determinants of innovation, and (b) based on a matched-pairs analysis for several specific forms of KTT activities. The data used in the study were collected by means of a survey of Swiss enterprises that took place at the beginning of 2005. We found that research and educational activities improve the innovation performance of firms in terms of sales of considerably modified products, research activities in addition also in terms of sales of new products. This could be shown by several methods: the innovation equation approach with instrument variables for specific forms of KTT activities as well as two matching methods.

The economics of collective knowledge and technological communication

Technological knowledge can be understood as a collective good when it is the outcome of the integration between internal to the firm investments in R&D and learning and the absorption of competencies and technologies provided by external organizations (such as, other firms, universities, R&D centers). Technological communication is a crucial strategy in such dynamic interaction between the firm and the system. Only under effective conditions of technological communication the private and social benefits derived from the exploitation of spillovers are higher than the private losses due to partial inappropriability. The article presents a simple microeconomic framework to understand knowledge production and distribution, integrating the effects and conditions of technological communication within a knowledge production function. The interaction between internal investments in R&D and learning, partial inappropriability, the conditions for the access to external knowledge and the exploitation of spillovers explains increasing returns in the production of knowledge.

The transfer and commercialisation of nanotechnology: a comparative analysis of university and company researchers

Nanotechnology has been proposed as the next general purpose technology and engine for growth for the 21th century. Increasing public R&D investments are foremost reflected in the growth of scientific publications, while nanotechnology still is in an uncertain phase of development with various directions of commercialization pending. This paper focuses on the challenges, modes and outcomes of nanotechnology as an emerging science-based field in Finland. The paper contributes by interrogating how challenges and modes of nanotechnology transfer differ across universities and companies and determine outcomes broadly defined. It uses survey data covering university and company researchers in the Finnish nanotechnology community. The results show significant differences in the perceptions of researchers across these organisations, and highlight specific challenges and modes as determinants of outcomes. The specificities of nanotechnology are also assessed.

Between market forces and knowledge based motives: the governance of defence innovation in the UK

The purpose of this contribution is to examine the evolutionary transformations that have characterised the UK defence innovation system since the mid 1980s. It focuses on the central and challenging issue faced by the Ministry of Defence (MoD) in implementing effective governance mechanisms emerging from the continuous trade-off between short-term market driven measures motivated by efficiency arguments, and more long term and relational considerations in terms of knowledge economics. Furthermore, in terms of technology transfer, this evolution has been accompanied by a gradual shift from an initial logic of spin-off to society expected from government driven military projects, to a logic of spin-in where the main concern of the military sector is to broaden its industrial and R&D base.

Researching the use of force: the background to the international project

This article provides the background to an international project on use of force by the police that was carried out in seven countries. Force is often considered to be the defining characteristic of policing and much research has been conducted on the determinants, prevalence and control of the use of force, particularly in the United States. However, little work has looked at police officers’ own views on the use of force, in particular the way in which they justify it. Using a hypothetical encounter developed for this project, researchers in each country conducted focus groups with police officers in which they were encouraged to talk about the use of force. The results show interesting similarities and differences across countries and demonstrate the value of using this kind of research focus and methodology.

---