The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&D3.5 Consequences for the National Economy3.5.1 National Systems of InnovationA vast body of the theoretical and empirical literature has convincingly shown thatcompanies are more reluctant to expand or relocate their R&D operations abroad thanto engage in other value adding activities, such as manufacturing, sales and marketing.Investigating the reasons for this phenomenon, Freeman (1992), Ehrnberg & Jacobsson(1997), Narula (2002) and others suggest that the companies are embedded in varioussystems of innovation in their home countries, built on formal and informal networksamong customers, suppliers, competitors, consultancies, universities, research institutes,government agencies and other funding organizations. Most likely, the cost ofbecoming familiar with – and integrating into – a new location may be prohibitive evenwhen the host location is superior to the home.Figure 3-7 Collaboration on innovation in Sweden. Share of companies conducting R&D andexport.ForeigncontrolledCompaniesSwedishcontrolledCompaniesUninationalCompaniesNonaffiliateCompaniesScientific System of Innovation:Universities and Research institutesVertical System of Innovation:Customers and SuppliersHorizontal System of Innovation:Competitors and Consultancies32.4% 72.5% 19.2% 19.4%36.1% 82.3% 23.2% 25.7%26.3% 52.9% 17.3% 18.7%Source: Johansson & Lööf 2005.Figure 3-7 reveals considerable differences in “embeddedness” within various systemsof innovation in Sweden. Based on data from the Community Innovation Survey, conductedin 2001, Johansson & Lööf (2005) find that foreign-controlled multinationalcompanies in Sweden collaborate more intensively than non-affiliate (independentcompanies) and uni-national companies (belonging to a group with only domestic affiliates).More than 70 percent of Swedish multinational companies collaborate oninnovation with the national scientific system of innovation (universities and researchinstitutes). The corresponding figure for foreign-owned multinational companies inSweden is about 30 percent. Among pure national companies engaged in innovation,only one in five companies collaborated with universities or research institutes. Consideringvertical systems of innovation (customers and suppliers) along with horizontalsystems of innovation (competitors or other companies in the same industry, and consultants),the study shows a similar pattern as for the scientific system of innovation.97