Role of Multinational Corporation

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  • Topic: Innovation, Innovation system, National innovation system
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DRUID Working Paper No 03-15

Globalisation of Innovation: The Role of Multinational Enterprises

by Rajneesh Narula and Antonello Zanfei

Globalisation of Innovation: The Role of Multinational Enterprises Rajneesh Narula Dept. of International Economics & Management, Copenhagen Business School, Howitzvej 60 2000 Frederiksberg, Denmark e-mail rn.int@cbs.dk Antonello Zanfei Version: 26 November 2003 Forthcoming in, Jan Fagerberg, David Mowery, and Richard R. Nelson (editors), Handbook of Innovation, Oxford University Press 2004.

Abstract This paper undertakes a brief evaluation of the trends in the internationalization of innovative activities. We provide a taxonomy of R&D internationalization strategies, and discuss the main relevant theoretical and empirical issues, before discussing the centripetal and centrifugal forces underlying the nature and evolution of cross border innovation. We address the issue of international technology partnering as a key strategy that is complementary to the internationalisation of innovative activities through internal means, before raising important policy dimensions and directions for future research that derive from these debates. Key words: R&D internationalization, globalisation, multinationals, alliances, technology policy JEL Codes: F23, O32

ISBN 87-7873-148-8

1 1. Introduction Economic globalisation is generally accepted to imply the growing interdependence of locations and economic units across countries and regions. Technological change and the increasing significance of multinational enterprises (MNEs) are often cited as the primary driving forces of this process. In this chapter we attempt to evaluate – albeit tentatively – the changing extent and importance of MNEs as conduits for cross-border knowledge flows. It is important to note that MNEs use a variety of options through which innovation develops and diffuses across national borders, among which FDI (through which MNEs acquire existing assets abroad or set up new wholly or majority owned activities in foreign markets) is only one option. Other modalities by which international knowledge flows occur include trade, licensing, cross-patenting activities, and international technological and scientific collaborations. These other modalities involve a wide variety of economic actors as we shall briefly outline below. However, to a great extent, the MNE also plays a pivotal role among these actors. This chapter will highlight the MNE’s multi-faceted role in the more general process of globalisation of innovation. The chapter is structured as follows. Section two undertakes a brief evaluation of the trends in the internationalization of innovative activities. Section 3 provides a taxonomy of R&D internationalization strategies, and discusses the main theoretical and empirical issues. Section 4 presents a discussion on the geographical concentration and dispersion of R&D activities, and the forces underlying the nature and evolution of cross border innovation. Section 5 will address the issue of international strategic technology partnering (STP) as a key strategy that is complementary to the internationalisation of innovative activities through internal means. Section 6 concludes this chapter and raises important policy dimensions that derive from these debates. 2. Trends in the internationalization of innovative activities. The growth of international innovative activities involves different actors - firms and institutions – and processes. A useful taxonomy proposed by Archibugi and Michie (1995) identifies three main categories of the globalization of innovation. Table 1 provides an outline of these categories. Although there are a variety of economic actors that undertake innovation and are engaged in its internationalization, MNEs are the only institution which by definition

2 can carry out and control the global generation of...
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