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

Davide Castellani () and Katiuscia Lavoratori ()
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Davide Castellani: University of Reading
Katiuscia Lavoratori: University of Warwick

Journal of International Business Studies, 2020, vol. 51, issue 1, No 9, 137 pages

Abstract: 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 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1057/s41267-019-00255-3

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