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1. Innovation Union
Competitiveness papers
Issue 2013/1
Internationalisation
of business
investments in R&D
EUR 25195 EN
Research and
Innovation

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European Commission
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3. EUROPEAN COMMISSION
Directorate-General for Research and Innovation2012 EUR 25195 EN
Internationalisation
of business investments in
R&D and analysis of their
economic impact
Authors of the study
Bernhard Dachs, Franziska Kampik, Thomas Scherngell, Georg Zahradnik
AIT Austrian Institute of Technology
Doris Hanzl-Weiss, Gabor Hunya, Neil Foster, Sandra Leitner, Robert Stehrer, Waltraut Urban
The Vienna Institute for International Economic Studies - wiiw

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Luxembourg: Publications Office of the European Union, 2012
ISBN 978-92-79-22836-0
ISSN 1831-9424
doi 10.2777/60978
© European Union, 2012
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5. 1
Foreword
Things have changed. Contrary to what happened during previous serious economic and financial crises, RD
investment has been protected by businesses during the past few years, thus illustrating that such
investment is now perceived as a crucial ingredient in the development of firms. It cannot be cut without
endangering the development or even the survival of many companies, especially in the context of increased
global competition. Firms have indeed maintained, on average, their investment in RD during the crisis in
2008-2010. Furthermore, according to a recent survey commissioned by the European Commission, top EU
businesses expect their investments in RD to grow by an average of 4% annually over 2012 to 2014.
Clearly, there is no future for firms' global competitiveness without investments in RD.
This, combined with the observation that firms increasingly perform RD activities outside their home
countries, shows how important it is for Europe to continue attracting business investment in RD from all
over the world. This study is encouraging in that respect. It concludes that the rising degree of
internationalisation in business RD benefits the EU's Member States and strengthens their capabilities in
science and technology.
The findings of this study are important for informing policy choices at a time when encouraging new
sources of growth in Europe is a priority. The creation of the Innovation Union, which will further make
Europe the place in which to invest in research and innovation, is obviously the right strategy. This calls for
increasing efforts at EU and national levels to realise the Innovation Union as a key component of the Europe
2020 strategy.
Pierre Vigier

6. 2
Main findings
Firms increasingly perform research and development (RD) at locations outside their home
countries. We refer to this development as the internationalisation of business RD. The
internationalisation of RD has become an important trend that shapes the national innovation
systems of all European Union (EU) and OECD countries. Foreign-owned firms already account for
20% to 25% of total business RD in France, Germany and Spain; between 30% and 50% in
Canada, Hungary, Portugal, the Slovak Republic, Sweden and the United Kingdom (UK); and more
than 50% in Austria, Belgium, the Czech Republic, Malta and Ireland. The project
“Internationalisation of business investments in RD and analysis of their economic impact” has
been launched by the Directorate General for Research and Innovation of the European
Commission (Economic Analysis Unit) to examine this phenomenon in detail. This study is part of
a set of projects providing key information for policy making in the perspective of contributing to
growth in Europe through innovation policies.
The results indicate that EU member countries are active players in the internationalisation of
business RD. The internationalisation of business RD has strengthened intra-EU integration
and the exchange of knowledge between EU countries. Around half of all RD expenditure of
foreign-owned firms in the EU can be assigned to firms from other EU member states.
There is also evidence that the EU is an attractive RD location for firms from outside the EU.
Non-EU firms, in particular firms from the United States of America (US), have continuously
increased RD expenditure in the EU since the 1990s. Further, multinationals from India, China,
Brazil or other emerging economies are just about to make first steps into the EU as a location for
their RD activities. Strengths of the EU as a location for RD include developed markets with a
sophisticated demand (‘lead markets’), its pool of skilled labour, a stable economic framework,
and excellence in academic and business RD.
EU countries benefit from RD activities of foreign-owned firms . Their RD expenditure helps
to raise overall RD intensity in order to increase investment in research and development to 3 %
of GDP as laid down in the Europe 2020 strategy. Moreover, RD expenditure and labour
productivity of foreign-owned affiliates is positively related to labour productivity of domestic
firms which may indicate spillover and competition effects.
Moreover, EU firms are also very active in RD abroad, in particular in the US, helping them to
open up new markets and expand globally. The home countries benefit from this global expansion
via reverse knowledge spillovers. Based on today’s empirical evidence, it is unlikely that these
overseas RD activities are a substitution for similar domestic activities.
The internationalisation of RD has also changed the framework for RD policy. Today, the
largest corporate performers of RD in a country are o en foreign multinational firms. Countries
that want to attract foreign RD should rely on a stable economic framework and on policies to
strengthen the capabilities of people, firms and universities, rather than grant financial incentives
to foreign-owned firms. Moreover, policy should help to raise the capabilities of foreign affiliates
and domestic firms for co-operation to stimulate knowledge spillovers between the two groups.
The Final Report of this study as well as its detailed Analytical Report and 34 Country reports are
available at: http://www.ec.europa.eu/research/innovation-union/index_en.cfm?pg=other-studies

7. 3
1. Which countries are attracting
RD of foreign-owned firms?
The level of internationalisation in
business RD has increased in recent
years in the large majority of countries.
We measure these changes by relating
the RD expenditure of foreign-owned
firms in a particular country to total RD
expenditure in the business sector of the
country (see Figure 1).
The level of RD internationalisation is
highest in small countries such as
Austria, Belgium, the Czech Republic or
Ireland. In some of these small countries,
RD expenditure of foreign-owned firms
is even higher than that of domestic
firms. Smaller countries exhibit also a
higher degree of openness in trade or
foreign direct investment. In addition, it
only takes a handful of multinational
firms and their RD investments to
substantially raise overall RD
expenditure in a small country.
Large and medium-sized countries, in
contrast, have considerably lower levels
of RD internationalisation. In the United
States, around 15% of all business RD
expenditure comes from foreign-owned
firms. The share of foreign-owned firms
is around 25% in Germany. Japan is
considerably below the US value.
But there are also exceptions to this rule.
The UK and Canada, on the one hand,
have high levels of RD
internationalisation compared to other
countries of similar size. The UK benefits
from its role as the preferred location for
the European headquarters of US, Asian
and other non-European firms. Canada
owes its high degree of RD
internationalisation to its strong
economic ties with the US.
On the other hand, Finland, Switzerland
and Denmark have surprisingly low
shares of foreign-owned firms on total
RD expenditure for small countries. The
reasons for this are country specific and
include the amount of RD done by
domestic firms, the attractiveness of the
market, but also geography and cultural
factors.
Large countries tend to have a lower
degree of internationalisation in relative
terms; in absolute terms, however, the
US, Germany, the UK, Japan and France
are by far the most important host
countries for RD activities of foreign-
owned firms. In 2007, foreign-owned
firms in the United States spent around
30 bn EUR on RD. The corresponding
amount for Germany is 11 bn EUR, 9 bn
EUR for the UK, 4.8 bn EUR for France
and 4.4 bn EUR for Japan.
RD internatio-
nalisation is
strongest in small
countries such as
Austria, Belgium, the
Czech Republic,
Hungary or Ireland

8. 4
There is no official number for RD
expenditure of foreign-owned firms for
the whole EU. Based on the data from
the member states, we estimate that
RD expenditure of foreign-owned firms
in the EU amounts to more than 42.6 bn
EUR in 2007. Around half of this amount
can be attributed to foreign-owned firms
from non-EU countries, mostly US and
Swiss firms.
RD internationalisation can also be
analyzed from a home country
perspective. Data on RD activities of
domestic firms abroad is scarce however.
The available data suggests that US
firms have the highest overseas RD
expenditure, followed by Swiss and
German firms. Firms located in
Switzerland spend more on RD abroad
than at home.
In a global perspective, the internatio-
nalisation of business RD is the result of
relations between a small number of
countries. Figure 2 illustrates these
relationships for the manufacturing
sector of the EU, the US, Japan, China and
Switzerland. The service sector is
excluded due to scarce data. The size of
the pie chart for each country indicates
the total amount of RD expenditure of
foreign-owned firms in this country, while
the pie slices represent the RD
expenditures of foreign-owned firms from
one particular country. Inter-
nationalisation between two EU member
states is excluded in Figure 2.
The figure reveals the outstanding
importance of the relationship between
the US and the EU. RD expenditure of US
firms in the EU and of EU firms in the US
taken together account for 2/3 of RD
Figure 1: RD expenditure of foreign-owned firms (inward RD expenditure) as share of total business RD expenditure,
2003 and 2007
Note: No 2003 data for Malta, Israel, Netherlands, Switzerland and Denmark; * 2008 instead of 2007;
** 2006 instead of 2007; *** 2004 instead of 2003
Source: OECD, Eurostat, national statistical offices, own calculations
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Malta*
Ireland
Belgium
Israel
CzechRepublic
Austria
Sweden
Slovakia
Hungary
UnitedKingdom
Canada**
Italy
Poland**
Slovenia
Romania***
Estonia
Germany
Spain
Norway
Portugal
Netherlands
France
Finland**,***
UnitedStatesofAmerica
Switzerland*
Denmark
Japan
Bulgaria
Latvia
OverallinwardRDintensity
2007
2003
RD expenditure of
US firms in the EU
and of EU firms in
the US together
accounts for about
2/3 of RD
internationalisation

9. 5
expenditure of foreign-owned firms in
manufacturing world-wide (The EU is
considered as one entity, and intra-EU
relationships - for example, RD of
German firms in France - are not taken
into account). The US is also the largest
investing country in the majority of the EU
member states. EU firms account for
more than 65% of the total
manufacturing RD expenditure of
foreign-owned firms in the US, or more
than 90% once other European countries
which are not members of the EU (mainly
Switzerland and Norway) are added.
In recent years, China has emerged as a
new location for RD of foreign-owned
firms. However, Chinese data is
incomplete and plagued by some
methodological issues which render a
comparison with data from OECD
countries difficult. We included the RD
expenditure of wholly foreign-owned
companies in China in Figure 2, which is
2.4 bn EUR for the year 2007. A
breakdown of this amount into different
countries of origins is not available.
From an European perspective, RD
internationalisation within Europe is
shaped by i) the role of Germany as the
most important home country, and by ii)
strong relationships between neighbouring
countries. Figure 3 illustrates this
integration with bilateral data on RD
expenditure of foreign-owned firms. The
thickness of the lines between countries A
and B corresponds to the sum of RD
expenditure of firms from country A in
country B and vice versa. The node size of
each country corresponds to the sum of
RD expenditure of foreign-owned firms
in the country.
Figure 2: Overseas business RD expenditure in manufacturing between the EU, the US, Japan, China and Switzerland,
2007, mio Euro.
Reading note: Firms from the EU have spent 774 mio EUR on RD in Switzerland in 2007; Swiss firms have spend 2,470
mio EUR on RD in the EU in 2007.
Swiss data include also the service sector; data for China is estimated based on national sources and US and Japanese
outward data
Source: OECD, Eurostat, national statistical offices, own calculations
13.242
1.009
1.262
4.489
United States of America
European Union 27
United States of America
Japan
Rest of the World
Switzerland
774 226
11
79
Switzerland
9.496
2.470
2.958
729
European Union 27
3.717 65
465
Japan
856
110
China
1.334
The United States is
the largest investing
country in the
majority of the EU
member states

10. 6
The resulting map of RD
internationalisation in Europe is uneven
and its patterns are shaped by
geography and size to a considerable
degree. Germany is the central hub in
this network and shows strong
interactions with its direct neighbours
Netherlands, Switzerland and Austria.
The UK shows particular high interaction
intensity with Sweden and France, Spain
shows the strongest connections with
France and Belgium. Finland appears to
have a diverse set of partner countries
but in terms of absolute size the
interactions are comparably low. EU-12
member states are mostly connected to
EU-15 countries; connections between
the EU-12 countries are weak. This is the
result of the small size of most of these
countries and a lack of multinational
companies originating from these
countries.
The internationalisation of RD has led
to a strong integration of business RD
within Europe. EU countries, as can be
seen in Figure 4, account for the largest
share of RD expenditure of foreign-
owned firms in almost all European
countries. Moreover, the EU is the largest
investor in Japan and the US. Figure 4
also confirms that the inter-
nationalisation of RD, through
Figure 3: Relationships between European countries measured by RD expenditure of foreign-owned firms, 2007
Note: Node size corresponds to the sum of RD expenditure of foreign-owned firms in a country. The thickness of the
lines between countries A and B correspond to the sum of RD expenditure of firms from country A in country B and vice
versa.
No data available for Italy and Greece
Source: OECD, Eurostat, national statistical offices, own calculations
Within Europe,
Germany is the
central hub in RD
internationalisation
with strong linkages
to its neighbours

11. 7
becoming more global, still has a strong
regional character.
Intra-EU RD internationalisation
(foreign-owned firms from one EU
country doing RD in another EU
country) amounts to around 19 bn EUR in
2007. This is almost half of the total
RD expenditure of foreign-owned firms
in EU countries (42.6 bn EUR). Thus, the
internationalisation of business RD also
contributes to the completion of the
European Research Area. Despite strong
ties between neighbouring countries,
there are no cohesive sub-groups in the
network – groups of countries which are
strongly connected with each other, but
have only weak links to the rest of
Europe.
Figure 4: RD expenditure of foreign-owned firms: share of EU countries as country of origin (2007)
Notes: Malta and Switzerland 2008; Ireland 2005, Canada 2003; only manufacturing included in Belgium, Canada,
France, Germany, Ireland, Japan, Norway and the United States of America
Source: OECD, Eurostat, national statistical offices, own calculations
0% - 30%
30% - 50%
50% - 65%
65% - 80%
80% - 100%
Integration between
EU member states in
terms of business
RD is strong

12. 8
2. The sectoral perspective
The internationalisation of RD is to a
considerable degree sector-specific. A
high sectoral RD intensity is a
necessary precondition for the
internationalisation of RD. Hence, in
most countries, RD expenditure of
foreign-owned firms concentrates on
RD intensive, high technology or
medium-high technology sectors (see
Figure 5). Moreover, some sectors offer
better preconditions for a decentralized
organisation of RD, because their
knowledge base is less cumulative,
allows an easy exchange of knowledge,
or because there are only few size
advantages in RD which would favour
a centralisation.
These factors help to understand why
the internationalisation of RD
predominantly takes place in
pharmaceuticals, machinery and
equipment, electrical and optical
equipment (including computers,
communication equipment, and
instruments), motor vehicles and
other transport equipment including
the aerospace sector. Each of these
sectors accounts for between 5.2 bn
EUR (machinery and equipment) and
16.4 bn EUR (pharmaceuticals) of
RD expenditure of foreign-owned
firms worldwide in 2007. The highest
degree of internationalisation is
found in pharmaceuticals, where 30%
of total RD expenditure in the US
and Europe comes from foreign-
owned firms, followed by motor
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Latvia
Bulgaria
Hungary
Denmark
Slovenia
Japan
Slovakia
Germany
Turkey
France
Belgium
Sweden
Austria
UnitedStatesofAmerica
Switzerland*
CzechRepublic
Greece*
Ireland*
Malta*
Canada*
Spain
Poland
Finland
Italy
Netherlands*
UnitedKingdom
Portugal
Norway
Estonia
Israel
Romania
ShareoftotalinwardBERD
Total non-
manufacturing
Manufacturing not
classified
High-tech
manufacturing
Medium-high-tech
manufacturing
Medium-low-tech
manufacturing
Low-tech
manufacturing
Figure 5: RD expenditure of foreign-owned firms by type of industry (2007)
Note: * 1999 (Greece), 2001 (Canada, Netherlands), 2005 (Ireland) and 2008 (Malta, Switzerland) instead of 2007; Due
to data constraints in the services sector, we only consider five industries: four manufacturing industries and total non-
manufacturing (including KIS and LKIS but also all other non-manufacturing sectors).
Source: OECD, Eurostat, national statistical offices, own calculations
The majority of RD
expenditure of
foreign-owend firms
is concentrated in a
few industries

13. 9
vehicles and other transport equipment.
The only relevant non-manufacturing
sector is business services, which is
important in Israel, Estonia or the UK in
particular. In most of these sectors, the
US attracts the largest amount of RD of
foreign-owned firms, followed by
Germany.
The lowest degrees of internatio-
nalisation of RD are found in low- and
medium-low technology sectors such as
textiles and clothing, wood, paper, rubber
and plastics, or basic metals and metal
products. An exception is the food and
drink industry, which shows high levels of
RD internationalisation due to a number
of multinationals with widely decentralized
RD networks. Though data is scarce, the
existing evidence suggests that service
industries tend to be characterised by
lower levels of RD internationalisation
compared to manufacturing industries.
3. Who are the new players in
the Internationalisation of RD?
There is evidence that Asian countries, in
particular China, India, Singapore,
Taiwan, or Malaysia are emerging as new
players in the internationalisation of
RD, both as host countries and as home
countries for internationally active firms.
Data availability and quality for these
countries, however, is poor compared to
the EU member states.
The most reliable source to analyse the
emergence of new players in RD
internationalisation is data on overseas
RD expenditure of US firms. This data
also allows some conclusions on the
attractiveness of the EU vis a vis
emerging economies as a location for
RD.
Figure 6 above displays overseas RD
expenditure of US firms in mio USD
between 1994 and 2008. We included
the EU, Japan, other OECD countries
(including Australia, Canada, Korea,
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
inMioUSD
Restof the world Non-OECDAsia
OtherOECD Japan
EuropeanUnion
Figure 6: Overseas RD expenditure of US firms, 1994-2008, mio USD.
Source: OECD based on US outward data by the US Bureau of Economic Analysis, own calculations
The importance of
emerging economies
as locations for
overseas RD is
growing fast

14. 10
Israel, Mexico or New Zealand), non-
OECD Asia (including China, India, Taiwan,
Singapore, or Malaysia), and the rest of
the world (including Africa and South
America).
The figure conveys two messages. In
relative terms, the rise of Asian
countries as RD locations for US firms
has led to a shift in the distribution of US
overseas RD expenditure. The share of
the EU on US overseas RD expenditure
has decreased from around 75% in 1994
to around 60% in 2008, with
corresponding increases for Asian
countries and non-European OECD
member states. It is also remarkable that
most of this decrease occurred in the
second half of the 1990s: the share of
the EU on US overseas RD expenditure
has remained relatively stable since the
early 2000s.
In absolute terms, however, RD
expenditure increases at each location,
and overseas RD expenditure of US
firms in the EU more than doubled
between 1994 and 2008. The
development in the last years prior to
2008 shows no indication that US firms
would increase their RD efforts in Asia
at the expense of locations in the EU,
indicating that the internationalisation of
RD is not a zero-sum game.
But China and India are not only host
countries for RD activities of foreign-
owned firms. A small number of Chinese
and Indian firms have already set up
RD activities in Europe and the US.
Some of these activities are not yet fully
reflected by the currently available data.
Future research should therefore focus
on the RD activities of these firms in
Europe and the US, their motives and
strategies.
4. What drives the internatio-
nalisation of business RD?
The motives of firms to locate RD
activities abroad are manifold and
complex, partly determined and driven by
very specific conditions in both host and
home countries.
As such, the size of the host economy is
a major driver of RD expenditure of
foreign-owned affiliates. Larger markets
which promise superior market potentials
and sales prospects are conducive to
RD efforts of foreign affiliates since
the costs of RD can easier and faster
be recovered and profits quickly
materialise.
RD efforts of foreign affiliates also
tend to be higher if they face lower
cultural barriers in their host countries.
Stronger cultural ties between home and
host countries ease communication and

15. 11
the exchange of information and
knowledge between foreign-owned firms
and local organisations, improve their
market knowledge and understanding of
customer preferences and demand and
facilitate their access to informal
networks in their host countries. Similarly,
geographic proximity is an important
driver of RD expenditure of foreign
affiliates. Foreign affiliates located in
neighbouring countries spend signi-
ficantly more on RD than foreign
affiliates located farther away.
Moreover, a pivotal role is also
attributable to the quality and size of a
skilled workforce which is crucial in any
successful research endeavours.
Specifically, a large pool of skilled labour
in the host country is conducive to RD
activities of foreign affiliates while a
shortage of a skilled labour force in the
home country tends to foster the
relocation of innovative activities to
other parts of the world with more
conducive and superior human capital
stocks.
In contrast, distance between the host
and the home country is obstructive to
RD expenditure of foreign affiliates.
Typically, foreign-owned firms have to
shoulder additional costs when
penetrating foreign markets: the costs of
co-ordinating geographically dispersed
RD activities, the costs of transferring
knowledge over distance, or a loss of
economies of scale and scope when RD
becomes more decentralised. And since
additional costs increase with distance,
RD expenditure is higher in foreign
affiliates located closer to the home
country.
Case study evidence moreover points to
the importance of sector-specific drivers,
such as the rising cost of RD that leads
to mergers and acquisitions, long-term
specialisation patterns in various
industries, the need to do RD close to
customers to learn from them, and the
Location decisions for
RD are driven by
market size,
availability of skilled
personnel, and
geographical and
cultural proximity

16. 12
various roles of policy as a driver for
trans-national co-operation in business
RD in Europe. In general, the most
important principle is non-discrimination
of domestic and foreign-owned firms.
In some sectors, such as aerospace,
however, policy has actively promoted
internationalisation by creating trans-
European conglomerates.
It is also important to recognize that
RD internationalisation is the result of
the activities of a very small group of
large, RD intensive, multinational firms.
The activities of only a handful of MNE
affiliates can explain aggregate patterns
of RD internationalisation in small
countries in particular.
5. How does the internatio-
nalisation of RD affect the
host countries?
Host countries can benefit considerably
from the presence of foreign-owned
firms. A first, direct effect is that foreign-
owned firms may help to increase
aggregate RD expenditure in a short
time. Moreover, there is also a positive
relationship between RD expenditure of
foreign affiliates and labour productivity
of domestic firms which may indicate
that domestic firms become increasingly
more productive due to knowledge
spillovers emanating from innovative
foreign-owned firms.
In addition, there is evidence of
performance and size effects on
domestic firms. Specifically, labour
productivity as well as employment of
foreign-owned and domestic firms is
positively related which may point to the
presence of strong competition effects
between domestic and foreign-owned
firms which render domestic firms larger
and more productive.
Foreign presence may also have negative
effects on the host countries, if RD
activities of foreign-owned firms
substitute or crowd-out activities of
domestic firms. Altogether, there is
however no evidence of a crowding-out
of RD activity between domestic and
foreign-owned firms. The analysis
indicates that higher RD intensities of
domestic firms go hand in hand with
higher RD intensities of foreign-owned
firms. These complementarities are
stronger in the group of EU-15 countries
than in EU-12
6. What are the consequences
for the home countries when
domestic firms are investing
in RD abroad?
The internationalisation of RD also has
implications for the home country of the
multinational firm. A main benefit of
overseas RD activities by domestic
multinational firms is the transfer of
Host countries can
benefit in various
ways from the
presence of foreign-
owned firms

17. 13
knowledge from abroad to the home
country. Various studies provide evidence
for such reverse knowledge transfers.
Reverse knowledge transfer may increase
the overall technological capacity and
strengthen the growth of the parent
company.
But overseas RD of firms may have
also negative consequences for the home
country when firms replace domestic
RD activities with similar activities
abroad. The empirical evidence - which is
however severely plagued by missing
data - does not suggest such a “hollowing
out” of domestic RD.
Case study evidence even suggests that
domestic and overseas RD complement
each other, because they target different
markets. This is in line with other studies
which point to complementarities
between domestic and overseas RD
activities, at least at the aggregate level
and in the long term.
7. Conclusions for Policy
The internationalisation of RD changes
the framework for RD policy. Today, the
largest corporate performers of RD in
many countries are foreign multinational
firms. RD, innovation, and subsequent
production activities may take place at
different locations inside and outside of a
particular country, which may alter the
way new technologies are transformed
into growth and new jobs.
Science and technology policy has to
reflect these changes. This study and
similar research have shown that the
internationalisation of RD promises
substantial benefitsfor home and host
countries. The EU has a favourable
position in the internationalisation of
business RD. Policy can help in various
ways to maintain or even improve this
position.
First, policy should maintain and foster
research-friendly environment, increase
the skills of the workforce – particularly
those needed for RD - and strengthen
university research. Results from the
quantitative analysis of this project and
similar studies suggest that a stable
economic framework and a sound science
and technology policy are important
attractors for RD activities of foreign-
owned firms.
Second, the results suggest that
substantial spillovers between foreign-
owned and domestic firms exist, raising
labour productivity in the latter group.
Policy needs to further stimulate these
spillovers by raising the capabilities of
foreign affiliates and domestic firms to
co-operate and stimulating foreign
affiliates to integrate into domestic
innovation networks. Third, the analysis
also shows that EU firms are very active
in RD outside Europe, in particular in
the US. EU firms also increasingly
perform RD in emerging economies,
including China and India. Our picture of
these activities, however, is still
incomplete, since data on this recent
phenomenon is scarce. Results of this
and similar studies indicate that RD of
EU firms outside Europe is beneficial for
the home countries. There is no evidence
that this expansion has led to a reduction
of RD activity in Europe. In contrast,
Europe benefits from the global
expansion, the opening up of new
markets which may also contribute to
growth at home, and from reverse
knowledge spillovers.
These findings suggest that European
policy makers should not be too worried
about RD activities of EU firms outside
the EU. The question if policy should
support outward internationalisation,
however, requires a better understanding
of causes and consequences. Therefore,
further research filling existing data gaps
on the potential impacts and future
prospects of RD internationalisation of
EU firms is required.
RD activities of
domestic firms
abroad do not
‚hollowing out‘
national RD
capacities
The European Union
has a favourable
position in the
internationalisation
of business RD

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European Commission
EUR 25195 — Internationalisation of business investments in RD and analysis of their
economic impact
Luxembourg: Publications Office of the European Union
2012 — II, 14 pp — 17,6 x 25 cm
ISBN 978-92-79-22836-0
doi 10.2777/60978

20. This is a study designed, commissioned and owned by the
European Commission, DG Research and Innovation, Unit
C6-Economic analysis and indicators. This study is part of a
set of projects providing key information for policy making in
the perspective of contributing to growth in Europe through
innovation policies.
This publication, as well as the complete Final report of the
study, the detailed Analytical Report and 34 Country reports
are available at: http://www.ec.europa.eu/research/innova-
tion-union/index_en.cfm?pg=other-studies
Studies and reports
KI-NB-25-195-EN-N
doi: 10.2777/60978