The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DStimulate Downstream Economic Activities (D1)Policymakers want to create the highest possible spillover effects from R&D performed bydomestic and foreign multinational companies. The R&D efforts in a country have thepotential to create “downstream” economic activities involving production, services andsuppliers, which lead to more employment opportunities. Ownership of the R&D does notmatter so much as the type of innovative activity (ETAN 1998).Policies require coordination between industrial policy and science and technology policy,and might focus on fostering knowledge-based cluster formation with emphasis onnetworks of R&D and production. Joint R&D efforts between domestic and foreigncompanies can be encouraged to increase the likelihood for spillovers and the degree ofembeddedness in the national innovation system of foreign R&D activities.In France, the government has approved and supports 55 “competitiveness clusters” in nineindustrial areas. State aid through various programs and tax exemption schemes areprovided to companies located within the borders of these clusters (OECD 2005d).Other policy measures focus on smaller companies (startups or spin-outs). Examples ofpolicy instruments are support for business incubation systems, early-stage public financing(Innovationsbron in Sweden), networking and technical assistance, as well as different typesof support for entrepreneurship and commercialization of research results.Support the Transition for Individuals and Regions (D2)The internationalization of production, services and R&D, together with technologicaldevelopment and other economic forces, bring about industrial restructuring, shifts inregional economies and labor market changes. Highly skilled workers face potentialunemployment in the wake of accelerated, manufacturing job losses.Governments can proactively implement policies to reduce the impact of internationalizationand offshoring, and facilitate these transitions for people and regions. Educationand training to improve skills for re-employment, and to collaborate with unions, industryassociations and companies to anticipate job changes help prepare people for more frequentjob and location changes during their working lives (BEPA 2005, Farrell & Rosenfeld2005).According to an OECD survey of 11 countries in 2005, no country had tried to identifyoffshoring companies to encourage them to create jobs at home. However, severalcountries, including Germany, Switzerland and the U.K., promote special training andadjustment programs for people who have lost their jobs to offshoring (or for other reasons)(OECD 2005d). The Brookings Institution in the U.S. has proposed a new wage insuranceprogram to provide incentives for rapid re-employment and on-the-job-training. In addition,the Trade Adjustment Assistance program should be extended to also include servicesworkers, according to the analysts (Brainard & Litan 2004, see also GAO 2005).47