AbstractView references

Despite an increasing internationalization of R&D activities by multinational firms, a major portion of corporate R&D still tends to be concentrated in firms' home countries. We examine the extent to which there exists a home-country bias in the location of R&D activities of 156 major R&D-intensive firms based in Europe, the United States, and Japan during 1995-2002, and develop hypotheses concerning the firm-level determinants of such home-country bias. We define this bias as a share of global RandD activities conducted in the home country that is not proportional to the general attractiveness of the country for multinational firms' RandD activities. We find home bias to be the predominant pattern, but with substantial variation among firms. The extent of the bias increases with the degree of scale and scope economies in RandD, the coordination costs of international RandD, and the embeddedness of firms' RandD in home countries' innovation systems. Technology leadership is associated with greater home bias if the home country provides relatively strong intellectual property rights protection, and firms face potential knowledge dissipation abroad. Our findings imply that home-country bias is, to an important extent, a response to the economics of RandD and the centripetal forces favoring centralization of RandD.