A critical appraisal of global innovation management literature: Is there really a "trend towards a global innovation network"?

Term Paper (Advanced seminar), 2005
12 Pages, Grade: sehr gut



Most literature on international R&D has employed a static and MNC-centered view, assuming some kind of evolutionary process by which R&D activities are internationalized, typically with some labs adapting products to local markets first, and whole research facilities being implemented on a world-wide basis last to finally profit from a "global innovation network".

This article challenges such a view, asking for a thorough and critical investigation. It will be shown that there are many counter-examples questioning the traditional view of evolutionary development and "optimal" organization that hovers around the "centralisation - decentralisation" dichotomy. Instead, a look on several contingency effects and empirical phenomena is proposed to gain interesting insights as to the limitations of many traditional models. The case of China's economic emergence provides a final illustration for these arguments. The conclusion shows how theoretical concepts known from other disciplines may serve as an analytical framework that can take into account more aptly the developments alluded.

1. Some Allegations in Literature With Respect to R&D Internationalization

It is purported that there is "a trend towards the international R&D network". According to this view, R&D internationalization started with the search for additional markets, then tapped cheap labor for production, localized existing products and finally ended with a fully developed R&D function [1]. This approach is an application of concepts developed before [2,3]. It is claimed that there is a general trend towards more cooperation and more decentralization of R&D. Given this trend, "five types" of R&D organization are claimed to be emerging. The company undergoes a linear development process across these types that ends with the emergence of a global R&D network [4]. This development process has mainly been explained by intra-firm optimization of global cost and transaction cost functions such as to minimize total organizational cost. This can even imply positive external effects by affiliates mutually learning from one another, thus increasing the firm's competitiveness [5]. This view is consistent with models based on transaction cost arguments [6] and with the process school's development model towards the "transnational" firm [7].

R&D internationalization motives other than cost were mainly summarized under the headlines demand, supply and external factors [8,9,10,11,12] and the categories local markets, resources and synergy potentials [13]. Indeed there has been evidence that market size [14] is an important location decision factor and that foreign R&D investment is correlated to general host country advantages [15]. In Germany, the share of external R&D expenditures spent offshore almost doubled in favor of expenditures within the industrial sector [16]. This "trend towards R&D internationalization" seems to contradict classical findings [17] that advocate inventors be granted local market monopolies by patents, logically implying R&D to be most centralized to maximally exploit economies of scale and to secure vital knowledge from uncotrolled outflow. Historically, this was indeed the case, the former German chemicals conglomerate IG Farben being an example for a Schumpeterian monopolist. Some have tried to explain this paradox by resorting to a "trend that R&D had to adjust to world-wide dispersion of knowledge and technology creation", with increasing competitive pressure for new and innovative products and the fusion of formerly unrelated technologies reinforcing this trend [18]. Discussion on this paradox has been ample and has often drawn on arguments known from general internationalization theory [19,20,21].

Another reason for this paradox is seen in the fact that increased competition from within and outside their industries has forced companies to globally source technological knowledge and human resources (i.e., researchers that can generate knowledge valuable to the firm). However, there is also a spatial dimension of this problem, because it is purported that the relevant knowledge needed is not available everywhere, but rather globally dispersed in certain regions or clusters ("centres of excellence"), which are characterized by a high rate of new technology output. Thus, the "hunt for the best heads" would lead to the establishment of local research and development, mainly in order to absorb critical competencies from centres of excellence and to support organizational learning on a global scale [22,23]. This standpoint basically views R&D internationalization as a sourcing problem, thus returning to competitive advantage theory [24], with technological advantage in the form of superiority of knowledge to form the essential asset basis of MNCs' competitiveness in world markets [25].


[1] Boutellier, R.; Gassmann, O.; von Zedtwitz, M. (Eds.) (2000): Managing Global Innovation, 2nd ed., Berlin et al: Springer, pp.3, 26-28, 70-72

Renowned standard book on developments and management of global R&D, supported by many case studies

[2] Perlmutter, H.V. (1969): The Tortuous Evolution of the Multinational Corporation, in: Columbia Journal of World Business, Vol. 4, Jan-Feb, pp9-18

A classic article, among the first to discuss different international organization patterns

[3] Bartlett, C.A. (1986): Building and Management the Transnational: The New Organizational Challenge, in: Porter, M.E. (ed.): Competition in Global Industries, Boston (MA), pp.367-401

Early "process school" book proposing a development process for MNC towards the "transnational" firm

[4] Boutellier, Gassmann and von Zedtwitz (2000), pp54ff.

See [1] for comment

[5] Hirschey, M. (1981): R&D intensity and multinational involvement, in: Economic Letters, Vol. 7, pp87–93.

One of the first studies dealing with learning and other external and spillover effects between R&D facilities

[6] Madhok, A. (1997): Cost, value and foreign market entry mode: The transaction and the firm, in: Strategic Management Journal, Vol. 18, pp39-61.

Transaction-cost based model of international organization

[7] Bartlett, C.A.; Ghoshal, S. (1989): Managing Across Borders: the Transnational Solution, Boston

The book that triggered the globalisation debate of the early 1990s

[8] Pearce, R.D. and Singh, S. (1992): Globalising Research and Development, London

A thorough study researching into various industries, backed by descriptive statistical data

[9] Dalton, D.; Serapio, M. (1993): U.S. Research Facilities of Foreign Companies, Washington (DC)

Influential study of of R&D internationalization activities into the US

[10] Florida, R. (1997): The globalization of R&D: Results of a survey of foreign-affiliated R&D laboratories in the USA, in: Research Policy, Vol.26, pp85-103

Similar to Dalton and Serapio, but with different hypotheses and explanations of R&D patterns

[11] Patel, P.; Vega, M. (1999): Patterns of internationalisation of corporate technology: location vs. home country advantages, in : Research Policy, Vol.28, No. 2-3, pp145-156

Study dealing with how and when certain technological advantages may or may not be internationalized

[12] von Zedtwitz, M. (1999): Managing Interfaces in International R&D, PhD thesis, Bamberg

Dissertation extensively reviewing "classical" R&D internationalization factors known from FDI theory

[13] Beckmann, C.; Fischer, J. (1994): Einflussfaktoren auf die Internationalisierung von Forschung und Entwicklung in der chemischen und phyarmazeutischen Industrie, in: zfbf, Vol.46, No. 7-8, pp630-657

Similar to [12], but more focused on peculiarities of the chemical and pharmaceutical industries

[14] Gao, T. (2000): Multinational Activity and Country Characteristics in OECD Countries, working paper, Department of Economics, University of Missouri, 2000.

Statistical inferences treating the question why certain R&D internationalization patterns occur

[15] Kumar, N. (2001): Determinants of location of overseas R&D activity of multinational enterprises: the case of US and Japanese corporations, in: Research Policy, Vol. 30, pp159–174

Comparison of the different ways US and Japanese firms have internationalized their R&D activities

[16] Grenzmann, C.; Marquardt, R. and Wudtke, J. (2000): FuE Datenreport 2001, Essen:

Practical quantitative compendium on German R&D

[17] Schumpeter, J.A. (1912): Theorie der wirtschaftlichen Entwicklung, Leipzig

The classic dealing with the importance of innovation for economic growth and thus implied policies

[18] Boutellier, Gassmann and von Zedtwitz (2000), pp3-5

See [1] for comment

[19] Granstrand, O.; Sjölander, H. (1992): Internationalisation and Diversification of Multi-technology Corporations, in: Granstrand, O.; Håkanson, L.; Sjölander, H. (Eds.): Technology Management and International Business: Internationalization of R&D and Technology, Chichester et al., pp181-207

Surveys and models of R&D dispersion patterns and their respective reasons within the 1990s' discussion

[20] De Meyer, A. (1993): Management of an International Network of Industrial R&D Laboratories, in: R&D Management,

Vol. 23, No. 2, pp109-120

Less orientied towards why international R&D emerges, but rather towards how one can manage it

[21] Zander, I. (1997): Technological diversification in the multinational corporation - historical volution and future

prospects, in: Research Policy, Vol. 26, pp209-227

Based on historical patterns, reasons and trends for technology internationalization are discussed

[22] Boutellier, Gassmann and von Zedtwitz (2000), pp35, 47

See [1] for comment

[23] Cohen, W.M.; Levinthal, D.A. (1990): Absorptive capacity - a new perspective on learning and innovation, in: Administrative Science Quarterly, Vol. 35, pp128-152

A well-known model proposing how a firm can incorporate external knowledge into the own organization

[24] Barney, J. (1991). Firm resources and sustained competitive advantage, in: Journal of Management, Vol. 17, Nr. 1, pp, 99–120.

A classic article discussing the concept of competitive advantage as the central means to economic success

[25] Bertin, G.Y.; Wyatt, S. (1988): Multinationals and industrial property (…), Hemel Hempstead, Hartfordshire

Study with an industrial economics background on the interaction of technology and MNC behaviour

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A critical appraisal of global innovation management literature: Is there really a "trend towards a global innovation network"?
University of St. Gallen
Doktoranden- (PhD) Seminar
sehr gut
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This study presents a broad and in-depth review of relevant literature on the topics of international management and globalisation of innovatory activities. I show that contrary to common allegations in theory, small and medium enterprises are able to engage in international activities by a high degree of technological specialisation and patent strategies. In addition, I present a critical review of the litera-ture in the light of these findings, taking the international research and development function as unit of analysis.
Doktoranden-, Seminar
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Marcus Matthias Keupp (Author), 2005, A critical appraisal of global innovation management literature: Is there really a "trend towards a global innovation network"?, Munich, GRIN Verlag, https://www.grin.com/document/34663


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