Template-type: ReDIF-Paper 1.0
Author-Name: Narula, Rajneesh
Author-Email: r.narula@henley.reading.ac.uk
Author-Workplace-Name: John H Dunning Centre for International Business,
	 Henley Business School, University of Reading
Title: Attracting and embedding R&D by multinational firms: policy recommendations for 
	 EU new member states 
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.
Classification-JEL: O32, F23, P36
Keywords: R&D, MNEs, EU expansion, human capital, new member states, innovation policies
Series: UNU-MERIT Working Papers
Creation-Date: 2009
Number: 033
File-URL: http://www.merit.unu.edu/publications/wppdf/2009/wp2009-033.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2009033