The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DAbout the StudiesThe studies in this report analyze international flows of corporate R&D and discuss theimplications for countries and their national policies. Key questions are:• What is the extent of the internationalization of corporate R&D, and what are thetrends, driving forces and barriers?• What are the potential, future implications for countries, and what are the optionsfor national policies, with a particular focus on Sweden?The report has a global scope and includes studies of Sweden, the U.S., Japan, Chinaand India. The studies build upon existing literature and try to contribute more up-todateempirical evidence based on interviews, surveys and additional data analysis. Themain findings are summarized below.R&D and innovation is still rooted at “home”...Corporate R&D is the least internationalized activity of multinational companies.Companies continue to keep a proportionally larger part of their R&D activities closeto their home base, when compared to production and other business activities. Forexample, U.S. pharmaceutical companies spend a major share of their R&D money inthe U.S., and Swedish-controlled multinational companies have a higher R&D intensityat home than at subsidiaries abroad.The reasons for keeping R&D at “home” include the complex and strategic nature ofinnovation, as well as the embeddedness of R&D activities in the domestic environment.In Sweden, several large, technology-intensive multinational companies havecontributed to – and benefited from – strong national innovation systems in the past....but international R&D is increasing.The domestic character of R&D has changed over the past two decades as a growingshare of corporate R&D is undertaken abroad. As an example, R&D investments bycompanies in Sweden have increased both in Sweden and abroad, but the share of investmentsoutside Sweden is increasing. The pattern of internationalization can beseen in many industrial sectors, including the pharmaceuticals, information andcommunications, and automotive sectors. European companies, especially fromsmaller countries, are more internationalized in terms of R&D than U.S. andJapanese companies.In the case of Sweden, 20 major enterprise groups performed approximately 40 percentof their R&D outside of Sweden in 2003, up from 20 percent in 1995. Thecommunications manufacturing industry has been the main driver behind R&D investmentsabroad.12