The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&D2.2 Internationalization of Corporate R&D2.2.1 What is the Internationalization of Corporate R&D?Internationalization is generally defined as the mobility across national borders ofgoods and services (trade), and of production factors such as people and capital. Theterm is often used to describe a dynamic process of increasing cross-border flows andeconomic integration, involving a number of interconnected activities and actors usingformal and informal channels (see ITPS 2004, OECD 2005b).In the context of this report, internationalization means the distribution of R&D operationsof companies, primarily large ones, among different countries and the cross-borderflows of R&D-related resources such as knowledge, technologies, researchers andengineers, and capital (investment and trade).The term “globalization” is sometimes used when internationalization has deepened toinclude a large number of countries worldwide and when the process has become increasinglydetached from a particular home country or parent company. This distinctionwill not be emphasized in this report and both terms will be used interchangeably.The internationalization of corporate R&D takes many forms (see UNCTAD 2005a,OECD 2005b). First, multinational companies are performing R&D at subsidiarieslocated abroad (outside the parent company’s home country). These R&D facilitiesmay have been established by “greenfield” investment (establishments set up fromscratch), by the transfer of R&D operations within the corporate group or by the acquisitionof existing R&D, for example a high-tech startup company, or as part of a largercorporate merger. The result for a given country can be both inward investment, whena foreign-controlled affiliate is established, and outward investment, when R&D activitiesare set up abroad.Second, companies are accessing knowledge and technologies produced or locatedabroad through international trade. It might be the import or export of patents, licenses,inventions, know-how, technical assistance, R&D services or the utilization of globalknowledge markets for solving specific research problems. International trade canoccur within the company, between the parent company and foreign R&D affiliates, orbetween the company and external, third-party, public or private entities.Third, companies are engaging in international cooperation through R&D networks,agreements and alliances between national and multinational companies, or betweencompanies and government, university or institute R&D entities. Activities includejoint R&D projects, scientific exchanges, strategic technology alliances and standardizationactivities.63