The Maturation of Global Corporate R & D: Theory and Evidence

This industry-level study examines the impact of foreign country factors like market size, technological strength, and science and engineering (S&E) capability on the conduct of U.S. overseas R&D during the 1991-2002 period. We find that while overseas markets primarily predict the entry of U.S. R&D, the S&E knowledge base of nations critically determines the level and sophistication of U.S. foreign subsidiaries' innovative activity. We also find important interindustry differences: U.S. electrical, electronics, computers, and communication industries are strongly drawn towards overseas S&E capability; industries including machinery, automobiles, and transport equipment are primarily attracted by the technological strength of foreign nations; U.S. R&D in chemicals mostly follows overseas markets