Intangible assets as drivers of innovation: Empirical evidence on multinational enterprises in German and UK regional systems of innovation

The sources of value creation are increasingly relying on intangible assets (IAs). IAs are the lifeblood of knowledge-intensive industries where the new value added is disproportionally based on specialized, non-repetitious activities. However, while the role of IAs is recognised as central to sustain the competitiveness of firms and innovation systems, the understanding of the mechanisms through which IAs display their effects has not yet been fully grasped.By focussing on the processes through which investments in IAs occur, this paper aims to explore the key dimensions through which two specific IAs – organisational and network capital – are enhanced and contribute to the innovativeness and embeddedness of Multinational Enterprises (MNEs) in regional innovation systems. On the basis of over forty in-depth interviews to leading staff of German and UK flagship MNEs operating in the automotive, life science and ICT sectors, the paper shows that MNEs adopt rather distinctive strategies to develop IAs; that MNE degree of local embeddedness is strictly related to both the kind of IA strategy and the local environment; and that causation mechanisms are at work between MNE embeddedness and regional creation of IAs.

► We identified key dimensions through which two intangible assets (IAs), organisational and network capital, are enhanced in MNEs and contribute to their embeddedness in regional innovation systems. ► We present processes through which investments on IAs occurs, the structures that support those processes within the firm and the external connections with the regional environment. ► We show that micro-level IAs influence and are influenced by regional IAs. ► MNEs appear to be deeply regionally embedded and supportive of the regional creation of IAs.