Overseas R&D and Performance Abroad: Evidence from Japanese Multinational Firms.
with Tomohiko Inui and Loriane Py
Recent studies have documented the existence of strong linkages between fi rm productivity, Research and Development (R&D) investment and export participation. However, there is still few empirical evidence regarding the importance of R&D efforts
for multinational firms and the channels by which R&D investments can a ffect a fi rm's performance abroad. This paper wants to investigate the role played by overseas R&D in the performance of Japanese affliates over the period 1996-2001.
A unique survey containing detailed information on the kind of R&D conducted in the subsidiaries allows us to distinguish between the effects of i) R&D aiming at adapting products and processes to the requirements of foreign consumers (adaptive R&D), and ii) R&D aiming at acquiring foreign technology and competencies (innovative R&D). Preliminary results highlight that adaptive R&D strongly enhances local sales of Japanese affiliates while the effect of innovative R&D is non significant. Furthermore, a more detailed analysis reveals that adaptive R&D for the local market has a positive impact on local affiliate sales while R&D for the world market affects affiliate exports to third countries. These results stress that market-specific adaptation strategies are an important determinant of firm performance on foreign markets. It is thus useful to identify the nature of the R&D undertaken by a firm when it comes to assess the bene ts of R&D investments.