Intellectual property protection, market orientation and location of overseas R&D activities by multinational enterprises

This paper develops an analytical framework to explain the determinants of location of overseas research and development (R&D) by multinational enterprises (MNEs) in terms of the nature and extent of foreign direct investment (FDI) and host country resources and policy regimes. Empirical findings for US MNEs suggest that MNEs prefer to locate their R&D activities in countries that are able to offer them, among other things, larger markets, technological resources and infrastructure. Host market-oriented affiliates are more likely to have R&D units than the export-oriented ones, especially in developing countries. The relative strength of the patent regime appears to affect the direction rather than the magnitude of R&D investments made in a country. Copyright (C) 1996 Elsevier Science Ltd