Drivers for International Innovation Activities in Developed and Emerging Countries

The internationalisation of corporate R&D is an opportunity for firms to reach local knowledge and expertise which is distributed globally. Firms' innovation activities which are carried out abroad comprise either the localization of uniform products to local needs with locally available knowledge or the whole product development process including R&D. The aim of the paper is to show how internal firm capabilities as well as external forces from the firm’s business and national innovation environment impact on the firm's decision to carry out different innovation activities abroad. The analysis is based on around 1200 firms headquartered in Germany. A second step observes whether the effects of the potential internal and external driving factors vary by the host country. The results show that especially firms with developed absorptive capacities and international experience are more likely to shift R&D intensive innovation activities abroad such as research and the conception/construction of new products. For the internationalisation of later stage innovation activities such as the manufacturing of new products or the implementation of new processes international experience as well as experience with intellectual property rights are required firm capabilities. The national innovation environment with high innovation costs and lack of labour contributes to the firm’s decision to set up manufacturing capacities for new products abroad. The competition in the home market has a limited influence or even hinders firms to internationalise their innovation activities. For the effect of the analysed internationalisation drivers per host country it could be shown that firms that innovate in countries with medium developed knowledge levels need pronounced export experience and in-house R&D activities than firms that innovate in advanced countries or nations with marginal knowledge levels. However, firms that plan to innovate in China should also engage in international R&D activities to further develop their international contacts. High innovation costs in the home country seem to motivate firms to innovate in medium knowledge countries while price competition fosters innovation activities in advanced knowledge economies but hinders firms to innovate in China. The overall conclusion emphasizes the capability driven decisions of firms to innovate abroad and not being forced predominantly by fierce competition or the lack of innovation resources in the home country.

Schmiele, Anja (2009), Drivers for International Innovation Activities in Developed and Emerging Countries, ZEW Discussion Paper No. 09-064, Mannheim, published in: Journal of Technology Transfer.