Category: Internationalization

Offshoring of Production Activities & Innovation in the Home Country

Today the study “The Effects of Production Offshoring on R&D and Innovation in the Home Country” by Bernhard Dachs of the Austrian Institute of Technology and myself was published online.

A strong innovation performance based on R&D, product development and the implementation of advanced production technologies is key for the long-term competitiveness of European economies. This study investigates the effects of production offshoring on research and development (R&D) and innovation activities of the firm in the home country. The analysis is based on a dataset of more than 3000 manufacturing firms from seven European countries taken from the magnificent  European Manufacturing Survey.

We employ propensity score matching to compare R&D and innovation activities of firms which have offshored production activities in a previous period to a control group of non-offshoring firms.

The analysis finds no negative effect of production offshoring on innovation and technological capabilities of firms in the home country. On contrary, offshoring firms spend significantly more on R&D or product design, and invest more in process innovation than non-offshoring firms. These results support a view on internationalization of firms that regards offshoring as a strategy of international expansion, and not a passive reaction of firms to a loss of their competitiveness.

Our results indicate that this expansion goes hand in hand with innovation and process modernization at home.



International and national collaboration for innovation – Does the composition of the regional knowledge base matter?

Together with Christina Koller I have recently finalized the draft for a research note about international and national collaboration for innovation. The paper titled “International and national collaboration for innovation – Does the composition of the regional knowledge base matter?” will be presented at the research conference of the Austrian Universities of Applied Sciences.

In the paper we argue that according to the resource-based view what firms do is to combine and to re-combine existing and new knowledge. This is particularly important for their innovation activities. Recently the region as the locus of innovation activity has attracted more attention. In particular considerable focus is put on national and international collaborative involvement of regional innovation activity as collaboration spans regional boundaries to access complementary resources. In this research we focus our attention on the characteristics of the regional knowledge base that affect innovation collaboration.

Using comprehensive EPO patent application data from 1978 to 2009,we analyze the driving factors for all European regions. We find that domestic collaboration across regional boundaries is driven by a lack of innovation potential and by a lack of technological strength. International collaborations are determined by a lack of technological strength as well, but are positively influenced by regional innovation potential.


International innovation collaboration, intramural R&D and innovation performance

Sverre J. Herstad’s and my short piece on the “The relationship between international innovation collaboration, intramural R&D and SMEs’ innovation performance: A quantile regression approach” is now published by Applied Economics Letters

We argue that in the current global economic landscape it is virtually impossible for any single firm to stay abreast of all relevant technological advances. Therefore integration in global innovation networks is crucial for innovation-based competitiveness. This is particularly so for SMEs due to their more narrow internal knowledge bases. However, the fact that international collaboration is organizationally demanding raises important questions about the relative importance of international collaboration and intramural R&D for innovation performance, and how they interact in determining it. We investigate these questions using Norwegian innovation survey data and quantile regression. The results show that firms in the upper quantile of the innovation performance distribution face a trade-off between engaging in global innovation collaboration, and engaging in systematic R&D, where both individually have a positive effect. This is consistent with baseline OLS findings. By contrast, firms in the lower quantiles of the distribution are found to strengthen their performance by means of R&D only. Consequently, the baseline OLS regression results fail to capture the determinants of innovation performance for the population of SMEs which are not already strong innovation performers. This leads to a risk of excessive SME innovation policy emphasis on inducing international collaboration.

MNCs between the local and the global: Knowledge bases, proximity and distributed knowledge networks

The volume “Innovation And Institutional Embeddedness Of Multinational Companies” edited by Martin Heidenreich has recently been published by Edward Elgar. It contains a paper by Björn Asheim, Sverre Herstad and myself titled “MNCs between the local and the global: Knowledge bases, proximity and distributed knowledge networks” where we investigate how proximity affects the geographical composition of an MNE’s network. We are able to show that the type of knowledge base (analytic vs. synthetic) matters for the effect. In short: for companies operating on a synthetic knowledge base, proximity clearly affects the composition of the MNEs innovation network. For companies operating on an analytic knowledge base it does not.

Industrial innovation collaboration in a capital region context

The paper “Industrial innovation collaboration in a capital region context” by Sverre J. Herstad, Øyvind Pålshaugen and myself is accepted for publication with the Journal of the Knowledge Economy. In this paper we investigate the relationship between capital region location, and the firm level decision to engage in collaboration for innovation.  We find that firm location in the capital region is associated with a slightly lower propensity to engage in innovation collaboration within the region, and a distinctively lower propensity to engage in domestic collaboration as a whole. By contrast, we find no substantial differences between firms in the capital and other Norwegian regions with respect to foreign innovation collaboration, or with respect to innovation activity in general. This means that firms in the capital exchange knowledge among each other by other means than collaboration. They draw comparatively less of their innovation input from the collaboration networks which define the national innovation system as a whole.