The discussion about the role of multinational enterprises (MNE) which are transferring their technology to undeveloped and developed countries is one of the most interesting discussions in the international trade theory with its authors in the century of globalisation. Multinational Enterprises are generating and transferring technology know-how, knowledge and innovations of products and processes over national borders to foreign countries for making research and development (R&D) in especially chosen R&D locations. The focus of the following diploma thesis is to search what kind of role multinational enterprises play in a globalised and internalized world by focussing how they make research and development in foreign countries and especially in developing countries as the third world.
In the first main part of the following work it will be described what kind of role multinational enterprise play in the century of globalisation. For a better understanding it follows a description what is exactly meant by the process of internalization of the markets and R&D. It will be discussed through theoretical analysis and models how the process to an internalization of R&D function. These will be explained through different theoretical approaches as the horizontal model of James R. Markusen , the vertical model of Helpman and a model of regression which used independent and dependent variables for the analysis. At least in this chapter the specific features of a MNE will be explained by categorising multinational enterprises through different characteristics and afterward the role of MNE in the process of globalisation will be assumed for the international trade between different countries.
The second part will be searching what kind of motives exists for multinational firms to outsource their R&D activities in foreign countries. For this, it is important to say exactly what kind of factors the chose of a location influence. Another interesting point is to analyse what kind of different variation of strategy MNE need and try to follow, especially to define what the goal of MNE is and how they can make benefit through FDI. Furthermore it will be explained the RTA-Index of the company in the domestic market and of the country of destination. In this case it will be assumed what a high or low RTA-Index indicates for companies who want to realise investments in foreign countries.
Table of Contents
1 Introduction
2 Globalisation and the Role of Multinational Enterprises
2.1 Internalisation of the Markets and Internalisation of R&D
2.2 Theoretical Approaches
2.2.1 The Horizontal Model of James R. Markusen
2.2.2 The vertical model of Helpman
2.2.3 Dependent and Independent Variables in Models of Regressions
2.3 Multinational Enterprises (MNE)
2.3.1 Specific Features of Multinational Enterprises
2.3.2 The Role of Multinational Enterprises for the International Trade
3 Research and Development of MNE in Foreign Countries
3.1 Motives for R&D in foreign countries
3.2 Choice of Location for R&D
3.2.1 Home-base-exploiting (HBE)
3.2.2 Home-base-augmenting (HBA)
3.2.3 Technology-seeking
3.2.4 Market-seeking
3.3 RTA-Index
3.3.1 HomeRTA
3.3.2 HostRTA
3.4 Advantages and Preconditions of R&D Activities in Foreign Countries
3.4.1 The OLI Framework of John Dunning
3.5 The Impact of Foreign Investment on Host Countries
3.5.1 The Approaches of Hymer and MacDougall
3.6 Transfer and Diffusion of Technology and Knowledge through FDI
3.6.1 Two Processes of Technological Change
3.6.2 Invention, Innovation and Diffusion
3.7 The Role of Spillovers in the Process of Technology Transfer and for FDI
3.7.1 The Spillover Effect
3.7.2 Case Study about the Costs and Benefits of FDI
3.8 Economical and Political Determinants of FDI in Developing Countries
3.8.1 The four competing Models
3.8.2 The Hypothesis of the Models
3.8.3 The Results of the Four Competing Models
4 Different Models of International Trade with Technology Transfer and R&D Activities in Host Countries
4.1 Model of Innovation – the Model of North-South Trade
4.1.1 Implication of the Model of Innovation
4.1.2 Adoption of the Model of North-South Trade
4.2 The Model of Innovation and Technology Transfer
4.2.1 Conclusion for the Model of Innovation with Technological Transfer
4.3 Multinational R&D Cooperation in Developing Countries
4.4 The Theoretical Choice Model of Navaretti and Carraro
4.4.1 Structure of the Game
4.4.2 Stages of the Game
4.4.3 The Propositions of the Model
4.4.4 The Empirical Analysis of the Model
4.4.5 Results and Relevance of the Game and the Empirical Analysis
4.5 Comparison of the Three Different Models and Conclusion for R&D of MNE
5 R&D Activities of MNE in Foreign Countries and in Germany
5.1 Research and Development of German MNE in Foreign Countries
5.1.1 Expenditures of R&D in Foreign Countries
5.1.2 Important Location for R&D Expenditures
5.1.3 The Emphasis of the Branch of Business of German MNE
5.2 Research and Development of Foreign MNE in Germany
5.2.1 Expenditures of R&D and Potentials of R&D in Germany
5.2.2 Germany – A Research Location
5.3 The Technological Efficiency of a Country
6 Summary
Objectives and Themes
This thesis examines the role of multinational enterprises (MNE) in a globalized economy, specifically focusing on how they conduct research and development (R&D) in foreign countries and developing nations. The primary objective is to analyze the motives, location choices, and strategic frameworks that drive MNEs to internationalize their R&D activities and to evaluate the subsequent impact on technology transfer and host country development.
- Theoretical frameworks of international trade, including horizontal and vertical models of MNEs.
- Strategic R&D location decisions based on home-base exploiting vs. augmenting motivations.
- Analysis of spillovers and the spillover effect in technology transfer.
- Economic and political determinants of foreign direct investment in developing nations.
- Comparative empirical analysis of R&D activities and efficiency in Germany and other industrial countries.
Excerpt from the Book
3.2 Choice of Location for R&D
The choice of the location and the motives of multinational enterprises to deal with research and development in foreign countries are determined mostly through the technological strength and weaknesses in the domestic market and also in the local market. Fundamentally it will be decided between four different strategies which are used by the choice of the location of MNE:
• Home-base-exploiting (HBE)
• Home-base-augmenting (HBA)
• Technology-seeking
• Market-seeking
The different proceedings for choosing a location will be described in the following text.
3.2.1 Home-base-exploiting (HBE)
In this strategy their will be utilize the technological and firm specific advantages in the domestic country for achieving innovation advantages in the country of destination. It will be obtain through direct adaptation of the product and production processes in the weak foreign country. The goal is to be competitive against other foreign companies.
Summary of Chapters
1 Introduction: Provides an overview of the role of multinational enterprises in a globalized world and outlines the scope and structure of the thesis.
2 Globalisation and the Role of Multinational Enterprises: Explains the internalisation process of markets and R&D through theoretical models and defines the specific characteristics of MNEs.
3 Research and Development of MNE in Foreign Countries: Analyzes motives for foreign R&D, location choice strategies, the OLI framework, and the role of technology spillovers in host countries.
4 Different Models of International Trade with Technology Transfer and R&D Activities in Host Countries: Compares various theoretical models, including the North-South Trade model and the Navaretti and Carraro choice model regarding R&D cooperation.
5 R&D Activities of MNE in Foreign Countries and in Germany: Provides empirical evidence on German MNEs abroad and foreign MNEs in Germany, focusing on expenditure patterns and locations.
6 Summary: Concludes the thesis by synthesizing the findings regarding the motivation for R&D internationalization, the impact of spillovers, and the strategic importance of R&D for national competitiveness.
Keywords
Multinational Enterprises, MNE, Foreign Direct Investment, FDI, Research and Development, R&D, Technology Transfer, Internalisation, Spillover Effect, Globalization, North-South Trade, Innovation, OLI Framework, Technological Efficiency, Economic Determinants.
Frequently Asked Questions
What is the primary focus of this work?
The thesis explores how multinational enterprises internationalize their research and development activities and the economic and political factors that drive these location decisions.
What are the central themes discussed in the paper?
Central themes include the globalization of R&D, the theoretical models of horizontal and vertical integration, the impact of technological spillovers on host countries, and the determinants of foreign direct investment in both developed and developing economies.
What is the core objective of the research?
The core objective is to identify why MNEs outsource R&D, how they select foreign locations, and what effects this has on knowledge transfer and competitive advantage.
Which scientific methods were employed?
The work utilizes a comprehensive literature review of international trade theories, theoretical modeling, and an analysis of empirical studies and statistical data regarding patent applications and R&D expenditures.
What topics are covered in the main section of the paper?
The main part analyzes internalisation strategies, the OLI framework, specific models of innovation such as the North-South Trade model, and empirical analyses of German and foreign MNE R&D activities.
Which keywords best characterize this research?
Key terms include Multinational Enterprises, Foreign Direct Investment, R&D, Technology Transfer, Spillover Effect, and internalisation strategies.
How does the "Home-base-augmenting" strategy differ from "Home-base-exploiting"?
Home-base-exploiting aims to adapt and use existing domestic technological advantages in foreign markets, whereas Home-base-augmenting aims to acquire new, complementary knowledge from abroad to strengthen the home-based R&D base.
What role do spillovers play in technology transfer?
Spillovers serve as non-rivalrous external effects where host countries or local firms gain access to knowledge, potentially increasing efficiency and competitive pressures, though they also pose risks of knowledge dispersion for the MNE.
How do political determinants influence FDI?
Political factors, such as instability or government ideology, significantly influence the risk perception of investors, often deterring FDI or necessitating specific structural agreements to mitigate these risks.
- Quote paper
- Janine Körner (Author), 2007, International Trade - Multinational corporations and technology transfer, Munich, GRIN Verlag, https://www.grin.com/document/120294
