The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&D...but international R&D is increasing.The domestic character of R&D has changed over the past two decades as the process ofinnovation has gradually become more globalized. A growing share of corporate R&D isundertaken abroad. As an example, R&D investments by companies in Sweden have increasedboth in Sweden and abroad, but the share of investments outside Sweden is increasing(Löf). The pattern of internationalization can be seen in many industrial sectors,including pharmaceuticals, information and communications, and automotive sectors(Marklund, Nilsson). European companies, especially from smaller countries, are moreinternational in terms of R&D than U.S. and Japanese companies.The internationalization of corporate R&D is a two-way phenomenon for the specificcountry. It comprises both the extent of R&D performed abroad by companies operating inthe country, and the extent of foreign-controlled R&D performed in the country.In the case of Sweden, 20 major enterprise groups performed approximately 40 percent oftheir R&D outside of Sweden in 2003, up from 20 percent in 1995. The communicationsmanufacturing industry has been the main driver behind R&D investments abroad. Duringthe same period, the share of foreign-controlled R&D in all industry sectors in Swedenincreased from 10 to 45 percent (Löf). Sweden is one of the most internationalized countriesin the world when it comes to corporate R&D.Most R&D is located within the Triad...The greater part of the internationalization of R&D takes place within the Triad (the U.S.,Europe and Japan). The U.S. is the major location for foreign R&D. Japanese companiesare least internationalized, and Japan is the least favored location within the Triad. Japanesecompanies are planning to expand their international innovation networks, but so far theylag behind because of industry structure and corporate culture (Nakazato & Hausman).The flows of R&D expenditure between the U.S., the EU-15 and Japan are illustratedin Figure 12-1. U.S. multinational companies invested 11.3 billion dollars in theEuropean Union in 2001. The automobile industry accounted for 37 percent of thisinvestment and the pharmaceutical sector 28 percent. In the opposite direction, EU-15R&D investment in the U.S. (total 16.7 billion dollars) was concentrated mainly in thepharmaceutical sector, accounting for 30 percent of that investment (OECD 2005).As is also the case of Sweden, the largest share of R&D abroad is within the OECD.Most of that R&D was carried out within affiliated companies (subsidiaries of themultinational company) (Karlsson, Löf).308