Internationalization of R&D: Industry-level analysis of United States transnational corporations’ affiliates in developing and developed countries

This study examines the determinants of the internationalization of R&D by affiliates of United States transnational corporations (TNCs) in developed and developing countries. The study investigates three hypotheses related to the impacts of labour cost, spillover and networking, and existing technology in a host country. Industry-level data on United States TNCs with majority ownership of the affiliates in a host country between 1989 and 2003. The results of the study suggest that labour cost had positive impact on the internationalization of R&D only for developed host countries. Spillover and networking effects seem to influence high-tech and low-tech industries in developed countries, whereas only medium-tech industries respond to spillover and networking effects to locate R&D in developing host countries. Furthermore, affiliates’ proportion of local sales and sales back to the United States have exhibited differential impacts on R&D spending in developed and developing countries.