R&D Activities in East Asia by Japanese, European, and US Multinationals

Rene Belderbos

Microeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: We contribute to the expanding literature on the internationalization of R&D by providing evidence on the extent and pattern of R&D activities by European, Japanese, and US multinational firms in 10 Asian countries and regions : PR China, India, the Asian NIEs (South Korea, Taiwan, Hong Kong, and Singapore),. and the ASEAN countries Malaysia, Thailand, Philippines, and Indonesia. We examine European patent application data of 186 top R&D spending firms in the chemicals, pharmaceuticals, engineering, IT and electronics industries during 1996-2003. It is shown that R&D activities by these firms in Asia are still very limited, although all indicators show a continuous increase. Only 35 out of 186 firms had patent applications based on inventions in the Asian regions, and the share of patents originating from Asia for the 186 firms reach 0,7 percent in 2003. Leading R&D performers in Asia are electronics and engineering firms such as Thomson, Siemens, Hewlett Packard, Matsushita Electric, and Philips, while chemical firms and in particular pharmaceutical firms are much less active. The multinationals are still responsible for a sizeable share (20-50 percent) of host country patenting activity in electronics related sectors in Singapore, Thailand, India, and Malaysia. The influence of these firms in contrast is almost negligible in South Korea and very small in Taiwan. An econometric analysis of the number of patents originating in different host countries and industries applied for by the 186 firms showed positive impacts of host country technological strength, market attractiveness, and the strength of the IPR protection regime, with the latter suggesting that policies to strengthen IPR protection can be effective in attracting R&D investments by multinational firms. Controlling for host country and firm factors, foreign R&D was found to be less extensive in the most recent period (2000-2003), suggesting that there has certainly not been a structural change in firm behavior favoring foreign R&D. Furthermore, R&D in Asia was found to show a distinctive pattern : it was shown to be much less sensitive to market attractiveness variables, but was found to be structurally higher than in other host countries. These findings are in line with the view that R&D in Asia is also largely driven by cost considerations, and only partially by market considerations.

Date: 2006-08
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