Who wins the race for knowledge-based competitiveness? Comparing European and North American FDI patterns

Andrea Coveri and Antonello Zanfei ()
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Antonello Zanfei: University of Urbino

The Journal of Technology Transfer, 2023, vol. 48, issue 1, No 9, 292-330

Abstract: Abstract The geographical dispersion of value-added activities triggered by the ‘great unbundling’ of production has made the race for competitiveness increasingly shaped by the capability of multinational corporations (MNCs) to orchestrate global innovation networks at world scale. However, major differences in the distribution of foreign investments across value chain functions undertaken by MNCs based in different economic areas have drawn little attention in the empirical literature. This work attempts to fill this gap by focusing on the FDI patterns of European and North American MNCs, which have historically played a key role in the internationalization of production and innovation. To this aim, we compare outward FDI flows of European and North American MNCs in manufacturing and knowledge-intensive activities over the period 2003–2017. We show that while European MNCs are key players in global networks of production, they do not reach the heights of North American investors in the dispersion of knowledge-based activities. Most importantly, European MNCs rely on emerging economies more to offshore production than to set up R&D labs in these countries; by contrast, US-based MNCs are more prone to engage in knowledge-intensive FDIs towards the most dynamic emerging countries (especially China and India, as well as the Four Asian Tigers). Further, we account for the growing role of new entrants in global FDI markets by comparing the advanced economies’ foreign investment decisions with those from Chinese MNCs. Drawing from the literature on the globalization of R&D and cross-border knowledge transmission, a discussion is finally offered on the potential implications of the detected differences in internationalization patterns, together with possible directions for future research.

Keywords: Internationalization of innovation; Foreign direct investment; Multinational corporation; Europe; North America; Emerging economies; Global value chains (search for similar items in EconPapers)
JEL-codes: F21 F23 L23 O32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10961-021-09911-z

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