Globalization of R&D by U.S-based Multinational Enterprises

This paper examines patterns and determinants of overseas R&D investment by US-based manufacturing MNEs using a new panel dataset over the period 1990-2004. The analysis reveals that R&D intensity of operation of US MNE affiliates is mainly determined by the domestic market size, overall R&D capability and cost of hiring R&D personnel. There is no evidence to suggest that financial incentives have a significant impact on inter-country differences in R&D intensity when controlled for other relevant variables. Overall, our findings cast doubts on the efficacy of efforts by host country governments entice MNEs affiliates to engage in domestic R&D in a global context where R&D is becoming a truly global activity.