Attracting and embedding R&D by multinational firms: policy recommendations for EU new member states

Narula, Rajneesh (2009). Attracting and embedding R&D by multinational firms: policy recommendations for EU new member states. UNU-MERIT.

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  • Author Narula, Rajneesh
    Title Attracting and embedding R&D by multinational firms: policy recommendations for EU new member states
    Publication Date 2009
    Publisher UNU-MERIT
    Abstract This paper asks: what can governments of new member states do to encourage MNEs to invest in R&D? There are two types of MNE R&D. Innovation can be undertaken in order to adapt its existing products and services to local stimuli. This is ‘demand-driven R&D’. Innovation can also be in stand-alone R&D facilities which are considerably more knowledgeintensive, and imply a considerably greater dependence on domestic knowledge sources and infrastructure. This is ‘supply-side R&D’. These two types of R&D require somewhat different approaches, and necessarily imply different policy options. In this paper, furthermore, we focus on the MNE and the potential for linkages, and do not limit ourselves to FDI and spillovers. MNEs engage in a variety of other informal and non-equity agreements to engage in knowledge exchange. We also deliberately consider the scope and competence at the MNE subsidiary level. These two novelties are useful in helping highlight the point that the tendency to focus on FDI flows is flawed, since knowledge exchanges and innovation are establishment level phenomena. An MNE policy is required which must link FDI policy and industrial policy in tandem. This paper argues that it is most practical to recommend that new member states focus on attracting and fostering demand-driven R&D activities by MNEs. Furthermore, we recommend that governments reduce the emphasis on costs while increasing the emphasis on specialised locationbound knowledge assets, and setting up programmes that foster demand-oriented upgrading of public R&D and human capital.
    Keyword R&D
    MNEs
    EU expansion
    Human capital
    New member states
    Innovation policies
    JEL O3
    F2
    P3
    Copyright Holder UNU-MERIT
    Copyright Year 2009
    ISSN 1871-9872
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    Created: Wed, 11 Dec 2013, 16:35:56 JST