Educational Improvement-East Asia and Europe

8/9/2019 Educational Improvement-East Asia and Europe

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Internationalization of R&D Activities: Comparison of Japanese and European MultinationalInternationalization of R&D Activities: Comparison of Japanese and European MultinationalInternationalization of R&D Activities: Comparison of Japanese and European MultinationalInternationalization of R&D Activities: Comparison of Japanese and European Multinational

Firms in the United StatesFirms in the United StatesFirms in the United StatesFirms in the United States

We investigate regional difference in the degree of internationalization of R&D andWe investigate regional difference in the degree of internationalization of R&D andWe investigate regional difference in the degree of internationalization of R&D andWe investigate regional difference in the degree of internationalization of R&D and

organizational characteristics oforganizational characteristics oforganizational characteristics oforganizational characteristics of multinational companmultinational companmultinational companmultinational companies (MNCsies (MNCsies (MNCsies (MNCs) to enable) to enable) to enable) to enable absorptiveabsorptiveabsorptiveabsorptive

capabilitycapabilitycapabilitycapability (AC)(AC)(AC)(AC) to absorbto absorbto absorbto absorb technological knowledge from the United States by Japanese andtechnological knowledge from the United States by Japanese andtechnological knowledge from the United States by Japanese andtechnological knowledge from the United States by Japanese and

EuropeanEuropeanEuropeanEuropean (mainly in German) MNCs. The findings show there are significant regional(mainly in German) MNCs. The findings show there are significant regional(mainly in German) MNCs. The findings show there are significant regional(mainly in German) MNCs. The findings show there are significant regional

differences in organization, and suggest that MNCs adifferences in organization, and suggest that MNCs adifferences in organization, and suggest that MNCs adifferences in organization, and suggest that MNCs are constrained for increasing their AC byre constrained for increasing their AC byre constrained for increasing their AC byre constrained for increasing their AC by

the national environments, in particular those related to R&D peoplethe national environments, in particular those related to R&D peoplethe national environments, in particular those related to R&D peoplethe national environments, in particular those related to R&D people.

INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION

In the past few decades, the world has seen the emergence of new technologies (e.g.,

information technology (IT) and biotechnology) that serve as key technologies across sectors.

In response to this, the management and organization of existing firms have been changing to

exploit these new technologies and create new markets. The intensity of internationalization

of R&D to exploit local knowledge has taken on increasing significance (Cantwell and

Piscitello, 2000) whereas the internationalization of R&D has accelerated and is concentrated

heavily in the triad, i.e., the United States, Japan and several EU countries, with the US as a

center (Edler, Meyer-Krahmer, and Reger, 2002). There are clear differences in degrees of

international absorption of R&D knowledge by country, though there is considerable variance

within countries, suggesting scope for managerial choice (Patel & Pavitt, 1991, 1997). Japan

and Germany are lagging far behind the UK and Switzerland (Gambardella, Orsenigo, and

Pammolli, 2000).

This paper focuses on the absorptive capability (AC) of technological knowledge from the

United States by Japanese and European (mainly German) multinational companies (MNCs)

in the electronics, automobile, pharmaceuticals, and chemical industries. Employing thenotion of absorptive capacity (Cohen and Levinthal, 1990) based on the framework of the

resource-based view of a firm (RBV) and dynamic capabilities, we analyze the organizational

difference between Japanese and European MNCs, which influence AC, and environmental

determinants, which shape organizations within.

To remain internationally competitive, high technology based MNCs need to acquire and

exploit technologies globally. There is a considerable evidence that MNCs continue to be

shaped by their home environments (Bartlett and Ghoshal, 1998; Porter, 1990). When they


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straddle multiple sets of national environments, they therefore need to adjust their

organization to the surroundings in the host country. However, since their headquarters are

constrained by the home country environments, these adjustments may not be possible toenforce. With regard to AC, firms aiming to absorb technologies abroad may not be able to

adjust their organization to the host country because of the environmental pressure in the

home country.

By comparing MNCs headquartered in the two regions, Japan and Europe, and their

respective home environments, this paper addresses the following questions: (1) What

differences may exist in the degree of internationalization of R&D between European and

East Asian MNCs?; (2) What are the differences in the organization of R&D personnel

between European and East Asian MNCs?; (3) How may home environments differ and

influence the organizational characteristics of European and East Asian MNCs?

Our empirical analyses show that there are distinctive degrees of international R&D among

East Asian and European MNCs. In addition, certain organizational characteristics regarding

R&D people have significant associations with AC in the United States. Moreover, these

characteristics differ significantly between European and East Asian MNCs. These results

suggest the home environments in the two regions, Japan and Europe, may influence the

characteristics of firms R&D activities not only in the home country, but also those abroad.

Experience of international R&D of MNCs and home national environments concerning R&D

people are introduced to explain the differences of MNCs by region.

This paper is structured as follows. First, the theoretical background and previous studies

related to this paper are outlined. Second, the methods of this chapter are explained. Third,

the empirical results of the data analysis concerning the performance of sales and patent

creation in the US and organizational difference between Japanese and European firms are

presented. The fourth section provides environmental evidences that may be regarded as thedeterminants of some of the organizational differences between Japanese and German firms.

Finally, the conclusion and limitations are discussed.

THTHTHTHEORETICAL BACKGROUNDEORETICAL BACKGROUNDEORETICAL BACKGROUNDEORETICAL BACKGROUND

Environments and OrganizationsEnvironments and OrganizationsEnvironments and OrganizationsEnvironments and Organizations

Environments where firms are located shape and constrain the organizations (Bartlett &


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Ghoshal, 1998; Porter, 1990). Researchers studying national innovation system (NIS) argue

that national environments such as R&D organizations, government policy, education system,

industry-university relationship and financial system, facilitate and constrain the science andtechnology activities within the systems (Edquist, 1997; Nelson, 1993). As the business

activities become increasingly global, how nation-state specific factors affect the managerial

practices has emerged as an important contingency (Lewin and Kim, 2004).

Kogut (1991) develops arguments for why different national trajectories arise and persist and

why institutional and organizational changes may be slower than technological changes. He

claims the required institutional and organizational change may be impossible to enforce due

to the unacceptable levels of changes in underlying principals for organizing work, of which

countries differ in their application (Kogut, 1991). Certain changes may be legally and

politically impossible in some countries and cultures. In the face of radical technological

change outside elsewhere in the world, high technology based MNCs may be locked-in their

home country environments and may not be able to force organizational changes (Narula,

2002).

The critical issue hitherto arises: How and to what extent do the environments constrain

organizational change in the era of radical technological change around the world? In the

other words, how and to what extent can firms leverage their own firm-specific capabilities to

resist the environmental pressures in the home and host countries and develop their own

R&D capabilities globally?

MNCs that straddle multiple institutions provide us with valuable examples to examine the

relationships between national environments and organizations. MNCs core capabilities are

strengthened by their home country environments (Porter, 1990). Yet, when they operate

abroad, they are required to adjust their organization to the surroundings in the host

countries. Some adjustments are possible to manage, but some may prove to be difficult orimpossible due to irresistible environmental pressures in the home country that constrain

MNCs. This paper deals with the fundamental issues concerning this interplay between the

national environments and organizations.

AAAAbsorptivebsorptivebsorptivebsorptive CCCCapacityapacityapacityapacity

Absorptive capacity provides a useful perspective for an analysis of the capabilities of firms to

absorb technologies from external sources abroad. Absorptive capacity is one of the most


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important constructs to emerge in organizational research over the past decades (Lane, Koka

and Pathak., 2002), and it has been explored and utilized by various researches in the past at

an individual level, at an organizational level or at a national level. According to Cohen andLevinthal (1990), absorptive capacity is the ability of a firm to recognize the value of new

external information, assimilate it, and apply it to commercial ends. This capacity is largely a

function of the firms level of prior related knowledge.

Employing the nation of absorptive capacity, this paper uses the term absorptive capability

(AC) to refer to the capability of absorbing technological knowledge from the United States.

Established companies try to increase absorptive capacity when facing the emergence of

technologies they lack internally. However, firms are constrained by their own internal and

external factors such as histories, paths, organizational structures, and shifting environments

in home and host countries. Nevertheless, some firms are capable of influencing environments

as well as changing organizations with strategies that reconcile internal and external factors

(Patel and Pavitt., 1991, 1997; Teece, Pisano and Shuen, 1997).

AAAAbsorptivebsorptivebsorptivebsorptive CCCCapabilityapabilityapabilityapability of MNCsof MNCsof MNCsof MNCs

As to the issue of absorption of technological knowledge across national borders, some

researchers use patents or scientific papers to analyze it at a country and sector level

(Cantwell and Piscitello, 2000; Patel and Pavitt, 1997). Less research has, however, been done

at the level of the firm. Studies whose main focus is on international R&D management have

dealt more with issues of motivation, location choices and roles of subsidiaries. The research

on technology sourcing by MNCs has focus on the levels of subsidiary or firm (Almeida, 1996;

Frost, 2001). However, they barely touched on the transfer and combination of the sourced

knowledge within MNCs. Research on comparative management and international business

has tended to focuses on governance forms and task structure (Lam, 1997); knowledge

transfer within MNCs has become a subject of study only recently. Thus the organizationaland managerial implications of AC including internal knowledge combination and utilization

to managers of MNCs have hardly been investigated.

Arai and Barron (2005) argue that AC consists of four capabilities, acquisition, combinative,

independence and utilization capabilities (See Appendix 1 for the definition of each capability).

They found interrelations between them as shown in Figure 1 (Arai and Barron, 2005).

Interestingly, there is no significant correlation between acquisition capability (share of

patents relying on US knowledge) and utilization capability (proportion of sales of a firm in


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the US). Instead, the result shows a significant positive association of combinative capability

with utilization capability, which suggests the critical role of intensive collaboration in the

integration of home and US knowledge and in bringing about high economic performance inthe US market. In addition, the significant positive correlation of independence capability

with acquisition capability implies the importance of the autonomy of US subsidiaries in

improving the acquisition of US knowledge. Overall, the results suggest that both combinative

and independence capabilities are critical to AC and that there may be a mediating effect of

combinative capability and independence on the relationship between utilization capability

and acquisition capability (Figure 2).

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Insert Figures 1 and 2 about here.

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Arai (2006) further found that most of the organizational characteristics of MNCs associated

with combinative and independence capabilities contrast whereas some of those regarding

human resources at the corporate R&D centers have significant correlation with both

capabilities in the same directions. This implies that R&D people of a firm may play a critical

role directly and indirectly in the successful absorption of technological knowledge from

abroad. Given these results, this study aims to compare East Asian (mainly Japanese) and

European (mainly German) MNCs, paying particular attention to their degree of

internationalization, organizational differences affecting AC, and environmental effects on

these organizational differences.

METHODSMETHODSMETHODSMETHODS

ResearchResearchResearchResearch SSSSettingettingettingetting

These hypotheses are tested in the context of the R&D activities of East Asian (Japanese and

Korean) and European (German, Swiss, Dutch, Swedish and Finnish) MNCs that carry out

R&D in the US as well as in their home countries. All the countries where the MNCs are

headquartered are members of the OECD and invest a high percentage of their GDP in R&D.

These countries share national borders or similar backgrounds culturally and historically. The

unit of analysis is the R&D organization of individual firms. The firms were selected from the

electronics, engineering, chemical and pharmaceutical industries. Firms in these industries


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have relatively high R&D intensity (R&D expenditure/sales).

SampleSampleSampleSample

After choosing the home countries of firms to be sampled, we identified the population of the

potential sample firms to be studied from the lists that ranked firms of each country or by

sector worldwide (e.g., OECD Outlooks, Shushoku-shiki-hou WEB, Die Zeit, World

Investment Report 2002). Then we chose the firms with which we had prior contacts or

potential contacts through mediating people or organizations such as industrial organizations

and research institutes. These personal contacts and introduction by local networks were very

important because of the sensitivity of the subject of R&D activities. Then we made

exploratory semi-structured interviews.

After this process, we invited the selected firms to participate in a survey that included

interviews and questionnaires. More than 50 firms expressed initial interest and were visited

at least once to conduct structured interviews. Out of these firms, nearly 40 firms completed

the questionnaires at their headquarters or main corporate R&D centers in 2003 or 2004.

Patent information for these firms was collected through the European Patent Office (EPO).

To compare AC by region, 47 firms that we interviewed at least once and had patent data good

enough for comparative analysis are included (Table 1). For the analysis of the questionnaire

items that relate to human resources, 33 firms are included (Table 2). These 33 firms had both

reliable responses to the questionnaires and patent data. The firms analyzed in the human

resources questionnaire represent four nationalities: Japanese, German, Swiss and Dutch.

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Insert Tables 1 and 2 about here.

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DataDataDataData

We use five sets of data: 1) responses to the questionnaires, 2) interviews, 3) public company

data regarding sales and R&D, 4) patent data, 5) government data at a country level. The

public company data were gathered from their special reports to the national authorities of

the stock markets or US authorities as well as from their annual reports. When these data

were not included in published reports, enquiries were made to each company directly.


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As regards interview information, we conducted extensive semi-structured interviews with

over 160 managers (1 to 8 people from each firm) in the Japanese and European firms in the

three regions, Japan, Europe and the US, from 2001 to 2002. The primary objective of theinterviews was to explore and understand the factors managers believed to be important

because the international R&D activities at a firm level with respect to organization and

management were still poorly understood. The exploratory interviews were followed by

conceptual ordering. As a result, five major organizational elements were elucidated: types of

R&D activities, decision making, external relationships, human resource, knowledge sharing,

control and coordination.

From the summer of 2003 to 2004, the questionnaire was administered to senior managers at

the corporate R&D centers in the home country. These managers were generally at the level of

reporting directly to the Chief Technology Officer (CTO) or his/her deputy. The constructs and

each question in the questionnaires were based upon the extensive prior interviews. The

questionnaires contain the five major elements of organizational characteristics identified

during the exploratory interviews. They cover not only R&D units, but also other functional

units. Some questions on organization were prepared to double check and confirm the validity

of the results from different aspects. Prior to the survey, the questionnaires were tested by a

few researchers and engineers in pharmaceutical and electronics industries we had a close

contact with.

Patent data are the main source of information used to track technological innovations in the

dispersed R&D locations of the Japanese and European MNCs in this study. The propensity to

patent differs across industries, however, and some firms are less interested in filing patents,

which makes it difficult to compare the success at developing inventions of firms by means of

patent data (von Hippel, 1994). Nevertheless, large MNCs, particularly those in the industries

we study, file patents vigorously enough for researchers to use patent data to analyze their

R&D activities (Patel & Pavitt, 1997).

We analyzed a total of 613,583 patents that were granted to the 47 companies (including

their consolidated subsidiaries) in the study. These were the patents filed between 1995 and

1999, either with the United States Patent and Trademark Office (USPTO), World

Intellectual Property Organization (WIPO), EPO or the national patent offices of the countries

where the firms headquarters are located. Because MNCs often subsequently file patents for

the same invention in several countries, we used only the first-filed patents in order to avoid

double or triple counting. These data were selected by the EPO, which has all the patent data


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filed in the patent offices listed above. The numbers of patents granted for the same number of

inventions differ in the patent systems of each region and country. Therefore, we scaled down

the number of Japanese and Korean patents by a factor of 4.9 to re-evaluate the volume ofinventions1.

We chose the patents whose priority date (i.e., the date a patent application was filed in

any country that has signed the Paris Convention) was between 1995 and 1999. These dates

were chosen primarily because of comparability of patent data as follows. The first reason is

the time lag between inventions and market performance. The average time lag varies across

sector. However, it takes at least three to four years according to the interviewees. Since the

sales were measured as of 2002, we decided to include patents first filed until the end of 1999.

Second, firms patent strategy had evolved since the early 1990s. German firms, in particular,

increased their patent filings despite the stable R&D expenditure during the same period.

Third, Japanese firms became more intensive in their internationalization in the 1990s, while

some companies, particularly in small countries, started to internationalize their R&D

activities much earlier (Kuemmerle, 1999). For the last two reasons, it was necessary to limit

data filed after 1995.

1 To deal with the problem of varying numbers of patents per invention, Eaton and

Kortum (1999) used a factor of 4.9 to scale down domestic patents in Japan based on the

analysis of Okada (1992). Using the data on the number of claims of inventions, Okada

finds that Japanese patents granted to foreigners contain on average 4.9 times as many

inventive claims as those granted to Japanese inventors, and others all have a similar

average number of claims per patent. In addition, according to the study of EPO, the

factor to scale down Japanese patents should be between 3 and 5. In addition, the

Korean patent system is very similar to the Japanese one due to their historical

assimilation of every Japanese policy, which was confirmed with the experts in the

patent issue. Hence it is assumed the Korean patents have a similar tendency to those

of the Japanese. Therefore I tested the factors of 3 and 4.9, and the principale results

were same.

Okada, Y. 1992. Tokkyo Seido no Ho to Keizaigaku (The Law and Economics of the

Patent System), Staff paper, Shinshu University. Shinshu. Eaton, J. & Kortum, S. 1999.

International Technology Diffusion: Theory and Measurement. International Economic

Review, 40(3): 537-570.


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STATISTICAL RESULTSSTATISTICAL RESULTSSTATISTICAL RESULTSSTATISTICAL RESULTS

This section reports the statistical analyses of the patents, sales, and questionnaires, whichshow the regional difference between Japanese and European (mainly German) MNCs.

Comparison of patents and sales between European and East Asian MNCsComparison of patents and sales between European and East Asian MNCsComparison of patents and sales between European and East Asian MNCsComparison of patents and sales between European and East Asian MNCs

This section presents the analyses of patent and sales of 47 MNCs. Table 3 shows the means of

key variables by region and industry. On average, compared in the same industries, European

MNCs have higher annual turnover, R&D expenditure and R&D intensity, and US market

share as a fraction of the total sales of a firm (USM) than their Japanese/Korean counterparts.

Their share of R&D staff in the US is also higher. USM and R&D intensity are slightly higher

for pharmaceutical and chemical industries in both regions, although turnover and R&D

expenditure are higher for electronics and automobile industries. The Japanese/Korean

electronics and automobile firms have a higher percentage of expatriates in their US R&D

centers on average.

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Insert Table 3 about here.

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To examine the statistical regional (East Asia and Europe) difference in the share of R&D

people in the home country as well as the capabilities comprising ACUS, USCC and USOL, we

used ordinary least square (OLS) analysis controlled by three variables: sector, R&D

expenditure (RDE) and R&D intensity (RDI). These variables were chosen as controls for the

following reasons. Researchers have recognized differences in AC by industry (Cantwell and

Piscitello, 2000; Patel and Pavitt, 1997). Therefore this study also uses industry

(electronics/automobiles vs. pharmaceuticals/chemicals) as a control variable. As for RDE,firms need internal R&D capability to assimilate external R&D knowledge. Prior research

finds firms R&D investment increases acquisition of external technologies (Lim, 2004;

Rosenberg, 1990; Veugelers, 1997). Thus firms total RDE is expected to influence positively

the absorption of US knowledge.

In addition, the RDI of a firm is included to capture the differences in firms commitment to

developing their knowledge base. Applied economists believe there are three classes of

industry-level determinants of RDI: demand, appropriability and technological opportunity


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conditions (Cohen and Levinthal, 1989). Cohen and Levinthal (1990) used the same measure

as a proxy for a firms absorptive capacity. Thus including this measure enables us to better

assess the interrelationships between various capabilities being independent of the total AC.

Factor analysis, including the variables of the four capabilities as well as RDE, RDI, total

annual sales and total employees of a firm, tells us that RDE, total annual sales and total

employees, belong to one of three components whereas RDI is in another, and all the other

variables are in a third component. Thus by including RDE, the size of a firm in terms of total

annual sales and total employees is taken into consideration to some extent.

The result of the regression shows that the proportion of R&D people at corporate R&D

centers in the home country of all those in the world is significantly higher (at the 0.01 level)

for the Japanese MNCs (78.7% on average) than the Europeans (70.5% on average) (The

parameter estimate is 0.306 when Japan is 1 and Europe is 0.). The European firms have

much more globally dispersed R&D centers than the Japanese, which coincides with the

finding below that there are a significantly higher proportion of foreign nationalities and more

diverse inventors nationalities in the European firms patents.

With regard to the patent performance, the statistical results (OLS) show that the capabilities

comprising AC of the Japanese/Korean firms are significantly lower than that of the European

counterparts except for utilization capability (Table 4). Acquisition capability (at the 0.1 level),

combinative capability (at the 0.1 level) and independence capability (at the 0.01 level) of the

Japanese/Korean firms are all significantly lower than that of the European firms.

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The difference in independence capability suggests that the European firms allow more

autonomy to their R&D subsidiaries in the US than the Japanese/Korean firms. This may be

at least partly explained by the difference in entry mode: the Europeans rely more on M&A in

general than Japanese firms (Kuemmerle, 1999; Arai, 2006). Consequently US subsidiaries

are less integrated and more independent from the headquarters. Another reason may be that

Japanese/Korean firms are not usually engaged in the types of R&D that requires substantial

autonomy of US R&D people to explore new possibility by themselves.


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A previous study found that there is a significant positive correlation between combinative

capability and utilization capability when both European and Japanese /Korean firms are

included (Arai and Barron, 2005). However, it is not so when only Japanese/Korean firms areexamined. In addition, this study finds that Japanese/Korean firms have a significantly lower

level of combinative capability than Europeans. This means these East Asian firms can attain

a high share of sales in the US without combining home knowledge with that of the US.

This may imply that Japanese and Korean firms intentionally try to separate the home and

US R&D more than the European firms because their culture, languages, and ways of R&D

are more distant from those of the US. Japanese/Korean firms may make more effort to divide

the work into modules in order to share it between the home country and the US because it is

more difficult for Japanese/Korean firms to co-operate with the US people in the case for

European firms. In general, Asian firms have less R&D experience in the US than Europeans,

as we discuss later. Hence, they may not know how to integrate US and home country

knowledge. It is possible that they may become more like their European counterparts in

developing synergies between the home and US R&D people to increase US sales as they

accumulate experience in the future.

Zooming into the composition of acquisition capability (share of patents that have American

inventors of all the patents of a firm filed in any of the patent offices listed above), the

European firms have more diverse combination of US knowledge with that of other

nationalities than the Japanese/Korean firms as shown Fig. 3, 4, 5, and 6. The other

nationalities are mostly other Europeans.

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Insert Figures 3, 4, 5, and 6 about here.

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Whether the R&D network of European firms is truly integrated or not (Bergek and Berggren,

2004), this indicates more complex integration of knowledge of the European MNCs whose

subsidiaries in other European countries interact directly with US subsidiaries. On the other

hand, the R&D of their East Asian counterparts is more concentrated on the home country,

and their international R&D activities are primarily focused on the US. This is consistent

with the results of other researchers argued (von Zedtwitz and Gassmann, 2002). There seems

to exist a clear regional difference between European and East Asian firms not only in the

degree of acquisition of US knowledge, but also in the patterns of combination of inventors


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with various nationalities.

Comparison R&D People at the Corporate R&D CentersComparison R&D People at the Corporate R&D CentersComparison R&D People at the Corporate R&D CentersComparison R&D People at the Corporate R&D Centersbetween European and East Asian MNCsbetween European and East Asian MNCsbetween European and East Asian MNCsbetween European and East Asian MNCs

This section presents the results of a questionnaire survey regarding R&D people at the

corporate R&D centers of 33 European (mainly German) and Japanese MNCs listed in Table 2.

In the questionnaires, respondents were asked to give the percentage of R&D people at

corporate R&D centers in the home country of all the R&D staff at corporate R&D centers in

the world. They were also asked the proportion of R&D staff with various attributes at

corporate R&D centers in the home country, such as academic degrees, foreign citizenships,

gender, postdoctoral experience and working experience in other firms using 5-point Likert

scales.

We rely on the questionnaire survey to analyze the difference of R&D peoples attributes

between Japanese and European firms. For the dependent variables derived from the

questions based on Likert scales, ordinal logistic regression (sometimes known as the ordered

logit model) is used to obtain parameter estimates of an independent variable, region (Japan

and Europe). Although it is common practice to use OLS analysis with data of this type, it is

more appropriate to rely on ordinal logistic regression2.

The statistical results show that the European firms have a significantly higher proportion of

R&D staff with foreign citizenship, foreign citizenship hired in the last three years, doctoral

degrees, foreign degrees and postdoctoral experience than the Japanese (Table 5). There is

no significant regional difference in gender and staff hired in the last three years without

working experience.

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2 It is more appropriate to rely on ordinal logistic regression for a number of reasons.First, the OLS method involves the assumption that the dependent variable has anormal distribution, but this clearly cannot be the case when the variable is ordinal.Therefore OLS will not be an efficient estimator. Second, OLS may produce predictedvalues that are beyond the actual range of the scale (that is, less than 1 or greater than

5). We obtained the estimates by using maximum likelihood estimation as implementedby SPSS.


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As explained above, the previous study revealed that, while most of the organizational

characteristics other than human resources have contrasting associations with combinativeand independence capabilities, several attributes of human resources such as foreign

citizenship and post-doctoral experiences at the corporate R&D centers in the home country

have significant associations with the two capabilities in the same directions: The

characteristics of foreign citizenship, foreign citizenship hired in the last three years, and

doctoral degrees have a significant positive association with one of the two capabilities

whereas the characteristics of gender and new graduates without working experiences have

no significant correlation with any of the capabilities (Arai, 2006).

Therefore, the findings of this study concerning the regional difference (in foreign citizenship,

foreign citizenship hired in the last three years, doctoral degrees, foreign degrees and

postdoctoral experience) suggest the European firms have more R&D people with attributes

that can directly or indirectly contribute to enhancing AC than Japanese firms. These results

raise the question of why there are such differences between European and Japanese firms?

The next section deals with this question.

NATONAL ENVIRONMENTS IN THE US, GERMANY AND JAPANNATONAL ENVIRONMENTS IN THE US, GERMANY AND JAPANNATONAL ENVIRONMENTS IN THE US, GERMANY AND JAPANNATONAL ENVIRONMENTS IN THE US, GERMANY AND JAPAN

This section aims to explain how the experience of international R&D of MNCs and the

historical background and national environments in the US, Germany and Japan may have

influenced the regional difference in the degree of international R&D and characteristics of

R&D staff of European and Japanese MNCs, which are identified above. The following

sections aim to explain the national environments in each country.

GDP,GDP,GDP,GDP, PPPPopulation andopulation andopulation andopulation and IIIIndustryndustryndustryndustry

With regard to the size of each country, The GDPs (Gross Domestic Products) of the US,

Germany and Japan are 5563, 1967 and 3885 (constant 1995) US billion dollars respectively.

The populations are 28.5 (US), 8.2 (Germany), and 12.7 (Japan) million. The GDP per capita is

largest in Japan, 44,457(constant 1995 US billion dollars), followed by Germany (32,813) and

the US (31,592). As for the industrial structure of the three countries in terms of the GDP and

employment, the second industry is more prominent in Germany (GDP, 31.9%; employment,

34.3%) and Japan (GDP, 37.1 %; employment, 33.0%) than in the US (GDP, 25.2%;


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employment, 24.2%). The US, on the other hand, has the largest shares of the GDP and

employment in the third industry. The share of manufacturing sector in GDP is very similar

between Germany (GDP, 23.6%) and Japan (GDP, 24.3%), and it is much higher than in theUS (GDP, 17.0%). These indicate that the industrial structures, at least with respect to the

second industry and manufacturing sector, in Japan and Germany are more similar to each

other than that of the US.

Experiences of International R&DExperiences of International R&DExperiences of International R&DExperiences of International R&D

History and recent changes of internHistory and recent changes of internHistory and recent changes of internHistory and recent changes of international R&D.ational R&D.ational R&D.ational R&D. Internationalization of science and

technology dates back to ancient times. We find evidence of inter-relationships among

civilizations from the era of the four great civilizations in the world. The transfer of industry

related to knowledge was observed before and after the first industrial revolution in Europe in

the eighteenth century. In the past few centuries, the technological hegemony has moved from

country through country in Europe and the US (Yakushiji, 1989). The flow of scientific and

technological knowledge between countries has become more and more intensive as the

number of industrialized states has increased. Whenever a country began to industrialize and

to emerge as a significant economic power, they imitated, exploited, and accumulated the

knowledge of leaders in a variety of ways.

The internationalization of R&D has become increasingly significant in the past few decades,

particularly in response to the rapid rise of new technologies. Large incumbent firms are

incrementally shifting and expanding their competence through collaboration with other high

technology based firms and universities, including those based overseas. They do not

necessarily just expand their expertise in their own central laboratories as they did before.

This is in part because it is difficult or expensive for firms to enhance their in-house

capabilities rapidly in new areas of research. It is also because they want to wait and see the

progress and profitability of new technologies in light of their business during the initialtrial-and-error or pre-paradigmatic period. A rapidly growing number of R&D related

alliances, mergers, joint ventures, and strategic partnerships on a global scale as well as of

foreign direct investment in R&D have been observed especially in the 1980s and 1990s. The

literature shows that these are heavily concentrated in the triad: the US, Japan and a few

countries in Europe (Edler, Meyer-Krahmer, and Reger, 2001)

Organizational forms.Organizational forms.Organizational forms.Organizational forms. At the level of the firm, as Gerybadze and Reger (1999) suggest, in

the process of internationalization of R&D, the change of management has resulted in new


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organizational forms, stronger cross-functional integration, and boundary-spanning

innovation processes. Past studies have developed various taxonomies for international R&D

units, such as ethnocentric centralized R&D, geocentric centralized R&D, polycentricdecentralized R&D, R&D hub model, integrated R&D though they have not achieved to show

a comprehensive model for organizational change in R&D organizations (Gassman and von

Zedtwitz, 1999). These studies have been particularly weak in assessing whether there is any

association between types of organizations and performance.

With regard to regional differences in the organization of the global R&D units of MNCs,

researchers have usually categorized most European large MNCs into a decentralized model

and most Japanese large MNCs into a decentralized model (e.g. Gassman and von Zedtwitz,

1999, 2000; Gerybadze and Reger, 1999). They argue most Japanese firms have not yet

developed an organizational capability suitable for managing international R&D to utilize

globally dispersed knowledge (Gassman and von Zedtwitz, 1999, 2000; Gerybadze and Reger,

1999).

Foreign direct investment (FDI) in R&D.Foreign direct investment (FDI) in R&D.Foreign direct investment (FDI) in R&D.Foreign direct investment (FDI) in R&D. With regard to outward R&D investment, US

firms are pioneer investors in R&D facilities abroad, while European firms investment

reached US levels in the late 1970s. Since the late 1980s, Japanese firms have increased their

overseas R&D activities (Jungmittag, Meyer-Krahmer and Reger, 1999). The United States is

a significant recipient country for foreign R&D expenditure (Jungmittag, Meyer-Krahmer and

Reger, 1999). Many industrialized countries, including Japan and Germany, extended their

R&D activities in the 1990s (Science and Engineering Indicators, 2004). According to

Jungmittag, Meyer-Krahmer and Reger (1999), the great increase of German firms R&D

expenditure from 1994 to 1995 is primarily explained by the boom in acquisitions, particularly

in the pharmaceutical industry.

Regional comparison shows that European firms R&D investment in the US is much greaterthan that of Japanese (Figure 7). Taking into account the size of the countries (Table 6),

Germany has a higher proportion of their R&D investment in the US than Japan. Moreover,

firms from smaller countries such as Switzerland and the Netherlands have a much higher

proportion of their R&D investment in the US than their European counterparts in Germany.

--------------------------------------------

Insert Tables 6 and 7 about here.

--------------------------------------------


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-------------------------------------

Insert Figure 7 about here.-------------------------------------

The data on the inward R&D investment, on the other hand, shows that the proportions of

investment by foreign firms in the US, Germany and Sweden are almost equivalent (US,

15.3%; Germany, 15.9%; Sweden, 14.0%) while it is only 5.2% in Japan and is as high as 25.8%

in the UK and 67.0% in Ireland (Jungmittag, Meyer-Krahmer and Reger, 1999). Jungmittag,

Meyer-Krahmer and Reger (1999) argue that the share of foreign R&D is especially high in

those countries in which foreign enterprises are strongly represented in manufacturing

industry. Japan and Germany have a similar share of manufacturing industry in their GDP

and employment (Table 7), so the difference of inward FDI in R&D is not probably due to this

bias.

Inventors of Patents.Inventors of Patents.Inventors of Patents.Inventors of Patents. The analysis of inventors addresses, shown on patents, allows us to

investigate the location of sources of knowledge that firms acquire. A t a country and sector

level, a number of researchers reported a large difference in the degree of acquisition of

foreign knowledge by firms (e.g., Cantwell and P; Criscuolo, 2004; Gambardella, Orsenigo and

Pammolli, 2000). Criscuolo, (2004), for example, shows the varying degrees of

internationalization of R&D by region and sector from the patent data of firms listed in the

Fortune 500 (Table 8).

-------------------------------------


-------------------------------------

Generally speaking, Japanese firms have a far higher proportion of inventors in the homecountry compared to European counterparts. The average percentage of US inventors of

European pharmaceutical companies is 38.7%. However, that of firms in the automobile

industry is small (Europe, 5.5%; Japan 0.80%) compared with compared with other high

technology industries. This suggests that European and Japanese automobile firms still rely

primarily on technological competence in their home country, which is more advanced than

that in the US.

For a specific case of MNCs engaged in biotechnology, Gambardella, Orsenigo and Pammolli


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(2000) report that several British and Swiss firms have most aggressively exploited

biotechnology in the US. On the other hand, German, French and Italian firms appear to be

slower, and Japanese firms lag far behind. Large Japanese pharmaceutical companies havebeen particularly slow to embrace the new technologies. Interestingly, the most substantial

investment of Japanese firms in biotechnology has been made by firms with historical

strengths in fermentation-based industries (Henderson, Orsenigo, and Pisano, 1999). Out of

the top 30 companies world-wide, Swiss firms account for 49.7% of patents with US inventors

that were filed in the US, while the share is lower for British (21.3%), German (17.8%), and

Japanese firms (1.9%), although there is a bias from the number of firms included in the

sample and country size (Gambardella, Orsenigo and Pammolli, 2000).

Human Resources for R&D ActivitiesHuman Resources for R&D ActivitiesHuman Resources for R&D ActivitiesHuman Resources for R&D Activities

R&D people with doctoral degreesR&D people with doctoral degreesR&D people with doctoral degreesR&D people with doctoral degrees The number of people with doctoral degrees may be one

of the critical factors that sustain high levels of R&D activity in high technology based

industries. This may be particularly important in rapidly changing technological fields that

require strong linkage with basic science. The statistical results of the questionnaires and

patent analysis show the percentage of doctorates among R&D people at corporate R&D

centers in the home country has a significant positive association with independence

capability (Arai, 2006). They also show the percentage of people with postdoctoral experience

at corporate R&D centers in the home country has a significant positive association with both

independence and combinative capabilities (Arai, 2006). Thus a shortage of qualified R&D

people with advanced degrees may limit the acquisition of technological knowledge from

abroad as well as R&D activities of high tech firms in the home country.

The numbers of doctoral degrees obtained by field vary across the US, Germany and Japan as

shown in Table 9. In natural science, Germany has the largest number of doctoral degree

obtained per 10,000 (0.726) in 2001, which is followed by the US (0.312) and Japan (0.125). Inthe field of biology, Germany also has the greatest number of doctoral degree obtained among

the three countries, but the number in Germany fluctuated in the 1990s while the US and

Japan have increased the numbers steadily during the same period (Table 10). These suggest

that the national environment in Germany is more favorable for MNCs to recruit new

qualified graduates than in Japan.

---------------------------------------------------------

Insert Tables 9 and Table 10 about here.


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---------------------------------------------------------

Foreign students and researchers in the home country and the US.Foreign students and researchers in the home country and the US.Foreign students and researchers in the home country and the US.Foreign students and researchers in the home country and the US. Foreign students in thehome country of MNCs are sources of new foreign employees for firms. The empirical results

show the proportion of R&D staff with foreign citizenship has a significant positive

correlation with combinative capability, and the proportion of those with foreign degree has a

significant positive correlation with both combinative and independence capabilities. A large

number of foreign students in the home country can increase the possibility of hiring foreign

R&D staff and indirectly enhance firms AC. The proportions of foreign students in higher

education in the three countries vary substantially: US (3.5%), Germany (9.6%) and Japan

(1.6%). With respect to the foreign students in the US, the proportion of foreign students at

the top universities such as Stanford University, Harvard University, and MIT by home

country is consistent with the national average (Appendix 2).

The majority of foreign students in Germany are from Turkey or other European countries,

while those in the US and Japan are mostly Asian3. The national backgrounds of foreign

students may be similar in Japan and the US, but the quality and rate of stay after

graduation of those students may differ between the two countries according to several

informants at the Ministry of Education, Culture, Sport, Science and Technology, Japan

(MEXT) and at Japanese universities. An official at the MEXT informed:

The national goal of receiving 100,000 overseas students has been achieved since a few years

ago. Now it is time to focus more on the quality of the students rather than quantity. We want

more students from Asia with high academic quality, but we hear the best students tend to go

to the United States. The students prefer American universities because of the language,

future job opportunity, and conditions at universities. It is often complained that the Japanese

universities are less open than American universities and are not well prepared to educate

international students.

The result of the survey of the MEXT to higher education institutions shows there are only

103 foreign graduate students in Japan who had an internship experience in the fiscal year

2004, while in the US and Europe internship for graduate students is much more common.

3 Share of foreign students in each country as of 1998: US, 3.5% (China, 9.8%; Japan,9.8%; Korea, 8.9%; India, 7.0%; Canada, 4.6%); Germany, 9.6% (Turkey, 15.7%; Iran,5.2%; Greece, 5.0%; Austria, 4.0%; Italy, 4.0%; Poland, 4.0%); Japan, 1.6% (China, 45.6%,

Korea, 33.0%, Malaysia, 3.7%) (Source: International Mobility of the Highly Skilled,OECD, 2001)


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This indicates that it is more difficult for foreign students to find a job in Japan than in

Europe even if they wanted. In addition, Japanese managers said Japanese firms were very

reluctant to hire foreign researchers and engineers because foreign employees tended to leavetheir firms and go back home before long.

There are more Japanese graduate students in US universities than Germans (OECD

Education database). This indicates that Japanese MNCs in the US are more likely to be able

to hire new staff with US academic degrees. However, the number of foreign-born US

researchers with science and engineering doctorates born in Japan is smaller than that of

Germany (Table 11). This may be partly because the number of Japanese students has

increased relatively recently compared with that of Germans. It may be also because German

R&D people are more likely to stay in the US after graduating from the US universities or

there may be more German immigrants with doctoral degrees into the US than Japanese.

--------------------------------------


-------------------------------------

The R&D staff that can understand practices both in the US and home country may improve

the connectivity and facilitate communication and understanding between the headquarters

and subsidiaries. The larger number of German researchers in the US than Japanese may

suggest that R&D subsidiaries of German MNCs have a greater advantage over their

Japanese counterparts because there are more German R&D people who can be hired locally

in the US.

International scientific collaboration.International scientific collaboration.International scientific collaboration.International scientific collaboration. International collaboration in the area of basic

science among researchers can provide a basis for international R&D activities of MNCs. For

example, it promotes the networking among scientists across national boundaries, which givesfirms valuable formal and informal information and contacts of other countries; contributes to

harmonizing research terms and methods; and, very importantly, helps educate and train

internationally competitive new graduates.

The proportions of internationally coauthored articles differ among countries: US (23.2%),

Germany (41.2%), and Japan (19.7%) (Table 12). From 1994 to 2001, the shares have

increased for all the three countries: US (7.4%), Germany (11.1%), and Japan (6.0%). German

authors have the greatest proportion, but the percentage of articles coauthored with US


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researchers is smaller (29.9%) than that of Japan (42.8%). Between 1994 and 2001, Japanese

coauthored articles with US people grew from 19.7% to 42.8% while the share of German-US

coauthored articles remained almost same.

--------------------------------------


-------------------------------------

This is because German researchers collaborate extensively with researchers in other

European countries. Thus the share of coauthored articles by region is consistent with the

results that European MNCs have much more extensive R&D network in other European

countries than Japanese. It is probable that the strong science base interweaving multiple

European countries contributes to the internationalization of R&D activities of European

MNCs.

CONCLUSIONCONCLUSIONCONCLUSIONCONCLUSION

Prior research has suggested that the difference in the degree of internationalization of R&D

reflects the technological capability and size of home and host countries (Gerybadze and Reger,

1999; Criscuolo, 2004). This study further investigates: (1) How components of AC differ by

region by looking into inventors addresses; (2) How organization of MNCs concerning R&D

people differ by region; (3) How national environments besides the technological capability

and size of home and host countries may hinder MNCs from transforming their organizational

characteristics mainly with respect to R&D people. Specifically, we looked into three

environmental factors: (1) qualified R&D people (doctoral candidates and foreign students in

universities) in each country; (2) availability of researchers with doctoral degrees who were

born in the home country of MNCs and work in the US; and (3) international collaboration inthe field of basic science.

The investigation of national environments indicates Japanese firms are more disadvantaged.

First, there are fewer qualified researchers with doctoral degrees and foreign researchers who

have studied in Japan than in Germany. Second, there are fewer researchers with doctoral

degrees who were born in Japan and work in the United States than those born in Germany.

With regard to the international collaboration in the field of basic science, Japanese

researchers have substantial linkage with US researchers, but the cooperation is heavily


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concentrated on the US. This suggests Japanese MNCs may face difficulty in diversifying

their R&D activities in other countries besides the US.

Since these environmental factors are usually beyond control of MNCs, it provides an

important implication to the policy makers, especially those responsible for higher education.

It may be more necessary for governments to encourage scientific collaboration with other

nations as well as to increase graduates with doctoral degrees and foreign students in certain

fields of technologies. It should allow MNCs to hire these R&D staff am improve their

capability not only to develop technologies in the home country, but to absorb technological

knowledge from abroad.

The major limitations of this paper are as follows. First, the relatively small sample lowers the

power to investigate inter-correlations between some of the variables. In addition, for more

accurate analyses, it may be necessary to analyze the data controlled by technology and

country although it is controlled by industry and region in this study. The products that utilize

the patent inventions vary from technology to technology as well as the period from R&D

investment to inventions. It will require a much larger patent data set and sample size, which

we did not have for this study as firms that can afford to establish corporate R&D centers in

the US are very much limited. The results are, however, significant for some variables and

allowed us to test the hypotheses.

The second limitation is the time lag between the questionnaires conducted in 2002 and

patent filed in 1995-1999 though some questionnaires asked about the situation in 1997.

Organizational characteristics in the late 1990s may have evolved toward 2002. Therefore, the

statistical correlations between the two data may have some bias because of the time

difference. However, common characteristics seem to persist for a very long time in

organizations, particularly laboratories, as interviewees acknowledged. Hence this problem

may not be as serious as other types of time lag.

The third limitation is that questionnaires were made to corporate R&D centers whereas

patent data were based on those filed by the whole company. Therefore, we need to be careful

in interpreting the results for this reason. Third, the interpretations of the meanings of

questionnaire answers had to rely mainly on the information from the managers because of

few empirical studies as this type. Although I used multiple answers and consulted multiple

informants to prove each organizational attribute of the four capabilities, there may be bias

from the informants due to the lack of the existing research.


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TABLETABLETABLETABLE 1111

Companies in sampleCompanies in sampleCompanies in sampleCompanies in sample

Country Electronics/Engineering Automotive Pharmaceuticals Chemicals Total

Japan Canon, Epson, Fujitsu,

Fuji-Xerox, Hitachi,

Mitsubishi Electric, NEC, NTT

DoCoMo, OKI, OMRON,

Matsushita Electric Industrial,

Sharp, Sony, Sumitomo Electric

Industries, Toshiba (15)

Honda, Nissan, Toyota (3) Eisai, Fujisawa,

Takeda, Yamanouchi

(4)

Hitachi

Chemicals,

Mitsubishi

Chemicals,

Sumitomo

Chemicals (3)

25

Korea Samsung, LG (2) 2

Germany Bosch, Infineon, Siemens (3) BMW, DaimlerChrysler,

Volkswagen (3)

Bayer,

Boehringer-ingelheim,

Merck, Schering (4)

Bayer, BASF,

Degussa,

Merck (4)

13

Switzerland ABB (1) Roche, Novartis (2) 3

Netherlands Philips (1) 1

Finland Nokia (1) 1

Sweden Ericsson (1) 1

Total 24 6 10 7 47

TABLETABLETABLETABLE 2222

Companies in sampleCompanies in sampleCompanies in sampleCompanies in sample

Country Electronics/Engineering Automotive Pharmaceuticals Chemicals Total

Japan Canon, Epson, Fujitsu,

Mitsubishi Electric, NTT

DoCoMo, Matsushita Electric

Industrial, Sharp, Sony,

Sumitomo Electric Industries (9)

Honda, Toyota (2) Eisai, Fujisawa,

Takeda,

Yamanouchi (4)

Hitachi Chemicals,

Mitsubishi

Chemicals,

Sumitomo

Chemicals (3)

18

Germany Bosch, Infineon, Siemens (3) BMW, DaimlerChrysler

(2)

Bayer, Merck,

Schering (3)

Bayer, Degussa,

Merck (3)

11

Switzerland ABB (1) Roche, Novartis (2) 3

Netherlands Philips (1) 1

Total 14 4 9 6 33


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TABLE 3TABLE 3TABLE 3TABLE 3

Means by Region and IndustryMeans by Region and IndustryMeans by Region and IndustryMeans by Region and Industry

Industry

(Number of sample firms)

Turnover

(US$ million)

Sales in US

(US$ million)

Employees RDE (R&D

expenditure)

(US$ million)

RDI

(R&D

intensity)

Asia Electronics & Automobile (16) 37827.3 9504.2 112083.1 2015.9 0.055

Chemicals& Pharmaceuticals (7) 6715.4 1007.9 17137.3 569.5 0.100

Europe Electronics & Automobile (6) 47075.0 10697.2 176318.9 3003.4 0.092

Chemicals& Pharmaceuticals (7) 13453.4 4357.4 56984.4 1374.8 0.115

All 30892.8 7397.6 104347.2 1874.2

Industry

(Number of sample firms)

USM (%) ACUS USCC USOL USR

(%)

USE

(%)

Japan Electronics & Automobile (16) 19.4 0.028 0.003 0.024 4.6 19.3

Chemicals& Pharmaceuticals (7) 19.1 0.066 0.017 0.041 4.7 5.9

Europe Electronics & Automobile (6) 22.9 0.157 0.017 0.098 9.0 6.8

Chemicals& Pharmaceuticals (7) 31.1 0.779 0.049 0.237 16.1 6.4

All 22.6 0.221 0.018 0.088 8.1 12.6

Sources: company reports (Turnover, sales in US, employees, RDE and RDI) and survey to individual firms (USR

and USE). Turnover, sales in US, employees, RDE and RDI are based on the consolidated data as of 2002.

USR: Share of R&D people if a firm in corporate R&D centers in US

USE: Share of expatiates from the home country in corporate R&D centers in US


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Table 4Table 4Table 4Table 4

Parameter estimates capabilities comprising AC (Japan = 1, Europe = 0)Parameter estimates capabilities comprising AC (Japan = 1, Europe = 0)Parameter estimates capabilities comprising AC (Japan = 1, Europe = 0)Parameter estimates capabilities comprising AC (Japan = 1, Europe = 0)

Region (Japan = 1,Region (Japan = 1,Region (Japan = 1,Region (Japan = 1, Europe = 0)Europe = 0)Europe = 0)Europe = 0)

Acquisition capability (ACUS)Acquisition capability (ACUS)Acquisition capability (ACUS)Acquisition capability (ACUS)

-.350*

(.177)

.407

Combinative capability (USCC)Combinative capability (USCC)Combinative capability (USCC)Combinative capability (USCC)

-.021*

(.010)

.381

Independence capability (USOL)Independence capability (USOL)Independence capability (USOL)Independence capability (USOL)

-.123***

(.041)

.510

Utilization capability (USM)Utilization capability (USM)Utilization capability (USM)Utilization capability (USM)

-.013

(.044)

.336

First row is unstandardized coefficient; Second row is standard error;

Third row is R square.

* P< .1;

** P< .05

*** P< .01


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Parameter estimates for share of R&D people (Japan = 1, Europe = 0)Parameter estimates for share of R&D people (Japan = 1, Europe = 0)Parameter estimates for share of R&D people (Japan = 1, Europe = 0)Parameter estimates for share of R&D people (Japan = 1, Europe = 0)

Region (Japan = 1, Europe = 0)Region (Japan = 1, Europe = 0)Region (Japan = 1, Europe = 0)Region (Japan = 1, Europe = 0)

Foreign

-1.649***

(.566)

.377

Foreign hired in the last three years

-2.295***

(.599)

.525

Female

0.189

(.304)

.490

New staff without working experience

0.463

(.569)

.070

Foreign degree

-1.647***

(.568)

.410

Postdoctoral experience

-2.380***

(.584)

.588

Doctoral degree

-1.826***

(.547)

.560

First row is unstandardized coefficient; Second row is standard error;

Third row is R square.

* P< .1

** P< .05

*** P< .01


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General statistics of the US, Germany and JapanGeneral statistics of the US, Germany and JapanGeneral statistics of the US, Germany and JapanGeneral statistics of the US, Germany and Japan

USUSUSUS GermanyGermanyGermanyGermany JapanJapanJapanJapan

GDPGDPGDPGDP 5563 1967 3885

GDP per capitaGDP per capitaGDP per capitaGDP per capita 31592 32813 44457

Population (1000)Population (1000)Population (1000)Population (1000) 284822 82340 127291

TotTotTotTotaaaal employment (1000)l employment (1000)l employment (1000)l employment (1000) 149298 38911 66222

Total researchersTotal researchersTotal researchersTotal researchers 1261227 264384 675898

Source: OECD MSTINote: As of 2001

GDP and GDP per capita are constant1995 US$ billion


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TableTableTableTable 7777

Share of GDP and Employment by IndustryShare of GDP and Employment by IndustryShare of GDP and Employment by IndustryShare of GDP and Employment by Industry


GDPGDPGDPGDP

First industry 1.6 1.1 1.7

Second industry 25.2 31.9 37.1

(Manufacturing) (17.0) (23.6) (24.3)

Third industry 73.9 60.9 63.1

EmploymentEmploymentEmploymentEmploymentFirst industry 2.7 2.9 5.3

Second industry 24.2 34.3 33.0

(Manufacturing) (16.1) (23.7) (22.0)

Third industry 73.1 62.7 61.1

Source: Doitsu Touitsugo no 10 Nen (Germany, 10 years after the Unification)

(2003)

As of 1997


Share of patenting activities at home and in the US using USPTO granted 1989Share of patenting activities at home and in the US using USPTO granted 1989Share of patenting activities at home and in the US using USPTO granted 1989Share of patenting activities at home and in the US using USPTO granted 1989----2000.2000.2000.2000.

A t h o m e I n t h e U S

S e c t o r E U M N C s J P N M N C s E U M N C s J P N M N C s

C h e m i c a l s 6 3 . 4 0 % 9 8 . 4 0 % 2 3 . 9 0 % 1 . 3 0 %

E l e c t r i c a l & e l e c t r o n i c s 5 2 . 6 0 % 9 4 . 4 0 % 2 3 . 1 0 % 4 . 3 0 %

M o t o r v e h i c l e s 8 9 . 7 0 % 9 9 . 0 0 % 5 . 5 0 % 0 . 8 0 %

P h a r m a c e u t i c a l s 3 6 . 4 0 % - 3 8 . 7 0 % -

Source: Criscuolo, 2004

84 European and Japanese MNCs listed in the Fortune 500.


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Number ofNumber ofNumber ofNumber of DDDDoctoral Degreeoctoral Degreeoctoral Degreeoctoral Degree OOOObtainedbtainedbtainedbtained by Fiby Fiby Fiby Fieldeldeldeld


Number of doctoral degree obtained by fieldNumber of doctoral degree obtained by fieldNumber of doctoral degree obtained by fieldNumber of doctoral degree obtained by field

Natural science 9816 5974 1586

Math/com science 1832 956 NA

Agricultural science NA 472 1241

Engineering 5502 2220 3864

Number of doctoral degree obtained by field per 10,000Number of doctoral degree obtained by field per 10,000Number of doctoral degree obtained by field per 10,000Number of doctoral degree obtained by field per 10,000

Natural science 0.344 0.726 0.125Math/com science 0.064 0.116 NA

Agricultural science NA 0.057 0.098

Engineering 0.193 0.270 0.312

Source: NSF Science and Engineering Indicators 2004

Note: Japanese data include thesis doctorates

Note: As of 2001


Number ofNumber ofNumber ofNumber of DDDDoctoraloctoraloctoraloctoral DDDDegreeegreeegreeegree OOOObtainedbtainedbtainedbtained in Biologyin Biologyin Biologyin Biology


Number of doctoral degree obtained in biologyNumber of doctoral degree obtained in biologyNumber of doctoral degree obtained in biologyNumber of doctoral degree obtained in biology

1990 4328 3054 301

1995 5376 3501 384

2000 5855 2737 560

Number of doctoral degree obtained in biology per 10,000Number of doctoral degree obtained in biology per 10,000Number of doctoral degree obtained in biology per 10,000Number of doctoral degree obtained in biology per 10,000

1990 0.173 0.384 0.025

1995 0.205 0.429 0.031

2000 0.208 0.333 0.044

Source: Japanese and US data from Science Based industries; German data from

German Ministry of Education and Research



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ForeignForeignForeignForeign----born US residentsborn US residentsborn US residentsborn US residents with S&E doctorates, by place of birthwith S&E doctorates, by place of birthwith S&E doctorates, by place of birthwith S&E doctorates, by place of birth

Number of

Residents

China 37,900

India 30,100

United Kingdom 13,100

Taiwan 10,900

Canada 8,400

Germany 7,200Iran 4,800

Former Soviet Union 4,600

Korea 4,500

Philippines 3,400

Poland 3,200

Japan 2,800

Argentina 2,700

Other foreign born 58,400Source: NSF Science and Engineering Indicators 2004


Note: As of 2001


ForeignForeignForeignForeign----born US residents with S&E doctorates by place of birthborn US residents with S&E doctorates by place of birthborn US residents with S&E doctorates by place of birthborn US residents with S&E doctorates by place of birth

InternationallyInternationallyInternationallyInternationally USUSUSUS share of internationallyshare of internationallyshare of internationallyshare of internationally

CCCCoauthored articlesoauthored articlesoauthored articlesoauthored articles Coauthored articlesCoauthored articlesCoauthored articlesCoauthored articles

Year 1994 2001 1994 2001

USUSUSUS 15.8 23.2 NA NA

GermanyGermanyGermanyGermany 30.6 41.7 30.2 29.9

JapanJapanJapanJapan 13.7 19.7 19.7 42.8

Source: NSF 'Science and Engineering Indicators - 2004' Appendix table 5-44

Note: As of 2001


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FFFFigureigureigureigure 2222

Acquisition of

US technology

Combination

Utilization of

US technology

Independence

FFFFigureigureigureigure 1111

Independence capability

Acquisition capability Combinative capability Utilization capability

3.835***

.042

.027

.004

5.927* 1.352*


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HOMEHOMEHOMEHOMEU SU SU SU S0.028 (100%)Combination

0.003 (10.7%)

Combination

0.001 (3.6%)

OTHEROTHEROTHEROTHER

Autonomy

0.024 (85.7%)

Figure 3 Japanese/Korean Engineering/Electronics/AutomobileFigure 3 Japanese/Korean Engineering/Electronics/AutomobileFigure 3 Japanese/Korean Engineering/Electronics/AutomobileFigure 3 Japanese/Korean Engineering/Electronics/Automobile

Share of patents concerned in all (share of combination and autonomy in ACUS)


Autonomy

0.098 (62.4%)HOMEHOMEHOMEHOMEU SU SU SU S

0.157 (100%)Combination

0.017 (10.8%)

Combination

0.042 (26.8%)


Figure 4 European Engineering/Electronics/AutomobileFigure 4 European Engineering/Electronics/AutomobileFigure 4 European Engineering/Electronics/AutomobileFigure 4 European Engineering/Electronics/Automobile


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Figure 5Figure 5Figure 5Figure 5 Japanese and KoreanJapanese and KoreanJapanese and KoreanJapanese and Korean PPPPharmaceutharmaceutharmaceutharmaceuticals andicals andicals andicals and CCCChemicalshemicalshemicalshemicals

HOMEHOMEHOMEHOMEU SU SU SU S0.066 (100%)

Combination

0.017 (25.8%)

Combination

0.008 (12.1%)


Autonomy

0.041 (62.1%)



HOMEHOMEHOMEHOMEU SU SU SU S0.779 (100%)

Combination

0.049 (6.3%)

Combination

0.493 (63.3%)


Autonomy

0.237 (30.4%)

Figure 6Figure 6Figure 6Figure 6 EuropeanEuropeanEuropeanEuropean PPPPharmaceuticals andharmaceuticals andharmaceuticals andharmaceuticals and CCCChemicalshemicalshemicalshemicals


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Figure 7 Foreign Direct Investment in R&D in the USFigure 7 Foreign Direct Investment in R&D in the USFigure 7 Foreign Direct Investment in R&D in the USFigure 7 Foreign Direct Investment in R&D in the US

US

Japan

Germany

Sweden

SwitzerlandNetherlands

2202

4355

166551336

6339

2649

7626

12562

2635918585

Source: NSF Science and Engineering Indicators - 2004

Note: Sum of expenditure from 1995 to 2000. Millions of current US$


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APPENDIX 1APPENDIX 1APPENDIX 1APPENDIX 1 Definitions and Measures of ConstructsDefinitions and Measures of ConstructsDefinitions and Measures of ConstructsDefinitions and Measures of Constructs

Key constructsKey constructsKey constructsKey constructs DefinitionsDefinitionsDefinitionsDefinitions MeasuresMeasuresMeasuresMeasures

Acquisition capability Acquisition capability Acquisition capability Acquisition capability

(ACUS)(ACUS)(ACUS)(ACUS)

Capability of a firm to acquire US

knowledge in the US

(Number of patents to which US

people contributed) / (Total number of

patents granted to firm)

combinative capabilitycombinative capabilitycombinative capabilitycombinative capability

(USCC)(USCC)(USCC)(USCC)

Capability of a foreign firm to combine

US knowledge with their home country

knowledge

(Number of patents to which US and

home people together contributed) /

(Total number of patents granted to

firm)

IndependenceIndependenceIndependenceIndependence capabilitycapabilitycapabilitycapability

(USOL)(USOL)(USOL)(USOL)

The degree of autonomy of a US

subsidiary to invent in the US

independently from the headquarters

(Number of patents to which only US

people contributed) / (Total number of

patents granted to firm)

Utilization capabilityUtilization capabilityUtilization capabilityUtilization capability

(USM)(USM)(USM)(USM)

US market sales as a fraction of the total

sales of a firm

(US market sales of a firm) / (total

market sales of a firm)

Size of R&D (RDE)Size of R&D (RDE)Size of R&D (RDE)Size of R&D (RDE) Total R&D expenditure of a firm Total R&D expenditure (US$)

R&D intensity (RDI)R&D intensity (RDI)R&D intensity (RDI)R&D intensity (RDI) Ratio of R&D expenditure to sales (Total R&D expenditure)/(Total sales)

* Patents are those first filed between 1995 and 1999 and granted at WIPO, EPO, USPTO, or national

patent offices where parent firms are located.

* Patents granted at Japanese Patent Office are reduced by a factor of 4.9.

* Turnover, R&D ex

Documents

Educational Improvement-East Asia and Europe