The maturation of global corporate R&D: Evidence from the activity of U.S. foreign subsidiaries

This study empirically investigates the impact of foreign country factors like market size, technological strength of industries, and science and engineering (S&E) capability on the conduct of U.S. overseas R&D during the 1991–2002 period. We find that overseas markets primarily predict the entry of U.S. R&D, while the S&E capability of nations is strongly correlated with the post-entry intensity of U.S. foreign subsidiaries’ innovative activity. We also find important inter-industry differences: U.S. electrical, electronics, computer, and telecommunication industries are strongly drawn towards overseas S&E capacity; industries including Machinery, Automobiles, and Transport equipment are primarily attracted by the technological strength of foreign industry; U.S. R&D in Chemicals mostly follows overseas markets. We discuss the implications of our results to the global organization of innovative activity and innovation policy.