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The lab and the plant: Offshore R&D and co-location with production activities

  • Davide CastellaniEmail author
  • Katiuscia Lavoratori
Research Note

Abstract

The literature has highlighted that the propensity of MNEs to co-locate offshore R&D labs with their production plants can vary substantially according to firm and industry characteristics. In this paper, we apply a novel two-stage estimation procedure that allows us to tease out this heterogenous behavior and investigate the factors that are associated with a higher propensity to co-locate production and R&D activities abroad. Using data on 1483 greenfield international investments in R&D activities made by 855 firms in 587 cities worldwide, we uncover that the strength of the co-location effect is indeed highly heterogenous across firms. In particular, it is higher among firms with less international experience and geographical dispersion of international activities, as well as with a lower share of intangible assets. These results are consistent with the idea that co-location is a substitute for firms’ ability to coordinate complex and dispersed organizational structures, and that firms relying relatively less on codified knowledge can use co-location of offshore R&D and production to facilitate knowledge transfer across activities.

Keywords

R&D location choice co-location multinational enterprises firm heterogeneity random parameter models cities organizational learning knowledge bases 

Résumé

La littérature a souligné que la propension des EMN à co-localiser à l’étranger des laboratoires de R&D avec leurs usines de production peut varier considérablement selon les caractéristiques de l’entreprise et de l’industrie. Dans cet article, nous appliquons une nouvelle méthode d’estimation en deux étapes qui nous permet de dégager ce comportement hétérogène et d’étudier les facteurs qui sont associés à une plus grande propension à co-localiser les activités de production et de R&D à l’étranger. En utilisant des données concernant 1483 nouveaux investissements internationaux relatifs aux activités de R&D réalisés par 855 entreprises dans 587 villes du monde entier, nous découvrons que la force de l’effet de co-localisation est en effet très hétérogène entre les entreprises. En particulier, il est plus élevé parmi les entreprises ayant moins d’expérience internationale et une dispersion géographique des activités internationales, ainsi qu’avec une part plus faible d’actifs incorporels. Ces résultats sont conformes à l’idée selon laquelle la co-localisation remplace la capacité des entreprises à coordonner des structures organisationnelles complexes et dispersées, et que les entreprises qui s’appuient relativement moins sur des connaissances codifiées peuvent utiliser la co-localisation de la R&D et de la production à l’étranger pour faciliter le transfert des connaissances entre activités.

Resumen

La literatura ha resaltado que la propensión de las empresas multinacionales a ubicar conjuntamente los laboratorios de I + D en el exterior con sus plantas de producción puede variar sustancialmente de acuerdo con las características de la empresa y la industria. En este artículo, aplicamos un procedimiento de estimación novedoso de dos etapas que nos permite descifrar este comportamiento heterogéneo e investigar los factores que se asocian con propensión más alta a ubicar conjuntamente las actividades de I + D en el exterior. Usando datos de 1.483 inversiones internacionales nuevas en actividades de I + D realizadas por 855 empresas en 587 ciudades alrededor del mundo, descubrimos que la fuerza de la del efecto de ubicación conjunta es de hecho altamente heterogéneo entre las empresas. En particular, es más alta entre las empresas con menos experiencia internacional y dispersión geográfica de las actividades internacionales, también entre las empresas con menor participación de activos intangibles. Estos resultados son consistentes con la idea de que la ubicación conjunta es un substituto de la habilidad de las empresas para coordinar estructuras organizacionales complejas y dispersas, y que las empresas confían relativamente menos en el conocimiento codificado pueden usar la ubicación conjunta en el extranjero de I + D y producción para facilitar la transferencia de conocimiento entre las actividades.

Resumo

A literatura destacou que a propensão de MNEs de localizar os laboratórios de R&D offshore com suas fábricas de produção pode variar substancialmente de acordo com as características da empresa e da indústria. Neste artigo, aplicamos um novo procedimento de estimação de dois estágios que nos permite desvendar esse comportamento heterogêneo e investigar os fatores que estão associados a uma maior propensão para co-localizar a produção e as atividades de R&D no exterior. Usando dados de 1.483 investimentos internacionais greenfield em atividades de R&D feitos por 855 empresas em 587 cidades em todo o mundo, descobrimos que a força do efeito de co-localização é de fato altamente heterogênea entre as empresas. Em particular, é maior entre empresas com menor experiência internacional e dispersão geográfica de atividades internacionais, bem como com menor proporção de ativos intangíveis. Esses resultados são consistentes com a ideia de que a co-localização é um substituto para a capacidade das empresas de coordenar estruturas organizacionais complexas e dispersas, e que as empresas que confiam relativamente menos em conhecimento codificado podem usar a co-localização de R&D e produção offshore para facilitar a transferência de conhecimento entre atividades.

摘要

文献强调, 跨国企业将离岸研发实验室和其生产工厂的地址安排在一起的倾向会根据企业与行业特征有很大变化。在本文中, 我们应用了一种新颖的让我们能够梳理出这种异质行为的两阶段估算程序, 并研究与更高的将生产与研发活动定位在一起的倾向相关的因素。利用全球587个城市的855家公司对1483个研发活动的绿地国际投资的数据, 我们发现共址效应的优势确实在各公司之间具有高度的异质性。特别是, 在国际经验较少、国际活动地域分散、以及无形资产份额较低的公司中, 这一比例较高。这些结果与共址可以替代公司协调复杂而分散的组织结构的能力的观点, 以及与相对较少依赖编码知识的公司可用离岸研发和生产的共址来促进跨活动的知识转移的观点是一致的。

Notes

ACKNOWLEDGEMENTS

The authors would like to thank the editor Ilan Vertinsky and three anonymous reviewers for their constructive and insightful comments and suggestions. This paper also benefited from feedback received from reviewers and participants at iBEGIN 2016 (Philadelphia), European International Business Academy 2017 (Vienna), Academy of International Business UK and Ireland 2017 (Reading), R&D Management Conference 2017 (Leuven), Academy of International Business 2018 (Minneapolis), and seminars in Ancona, Lucca, Keele, Trento, Urbino and at NIESR (London). Financial support from a BA/Leverhulme Small Research Grant (SG163244) is gratefully acknowledged.

Supplementary material

41267_2019_255_MOESM1_ESM.pdf (465 kb)
Supplementary material 1 (PDF 466 kb)

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Copyright information

© Academy of International Business 2019

Authors and Affiliations

  1. 1.Henley Business SchoolUniversity of ReadingReadingUK
  2. 2.Warwick Business SchoolUniversity of WarwickCoventryUK

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