With the rise of the knowledge economy and the intensification of competition in the international market, multinational companies' pursuit of factors to enhance competitiveness has extended from the fields of sales and production to the field of technology research and development. Overseas technology investment has become a multinational It is an important part of the company to enhance its competitiveness and implement its global business strategy. Research and development (R&D) internationalization has become a new trend in world economic integration following the globalization of trade, production globalization and financial capitalization. To explore the motivations for R&D internationalization of multinational companies, we can analyze it from two aspects: economic factors and institutional factors.
The motivations of economic factors
To analyze the motivations of R&D internationalization of multinational companies from the perspective of economic factors, we believe that resource factors and tax factors are important factors for the internationalization of R&D of multinational companies. motivation. The resource elements include financial resources, physical resources and intangible resources.
(1) Motivation of resource factors
Multinational companies can use many methods to carry out innovative activities. On the one hand, they can produce a sufficient number of products through large-scale internal investment to dilute the unit Product R&D costs, or by taking other activities related to company functions to achieve product innovation, such as improved design, quality control and engineering work. On the other hand, multinational corporations can conduct R&D internationalization by utilizing external resources, such as acquiring capital equipment and intermediate products through licensing agreements. Another form between the external market and internal organizations is international R&D international cooperation agreements, such as partial cooperation with host country companies, universities, research institutions and governments to develop products targeted at the host country market.
Using internal resources is more effective than external resources, because the main reason why multinational companies have core competitiveness in market competition is that they have relative technological advantages. Innovations carried out in R&D include product innovation and In the process of process innovation, if the R&D results are captured by competitors due to the use of external resources, it will have a huge adverse impact on multinational companies. Especially in the process of R&D internationalization, an important reason for multinational companies to develop in the host country market is to have ownership advantages. The root of the ownership advantage is advanced technology. Therefore, even if the investment cost is higher in the short term, multinational companies are still willing to independently invest and establish R&D laboratory, which is very important to the company's long-term development.
Of course, there is a dynamic balance between utilizing external resources and internal resources. Although the use of external resources will weaken the company's own R&D capabilities, it will to a large extent promote the company to obtain advanced technology as quickly as possible, and many times it is due to the policy and legal restrictions of the host country, or the location advantages and publicity of the host country's enterprises. Due to relationship advantages, multinational companies must cooperate in the process of R&D internationalization, otherwise they will not be able to obtain market access rights in the host country.
Therefore, in the process of R&D internationalization of multinational companies, there is more of a complementary relationship between internal and external resources, but the premise is that the company must have sufficient absorption and transformation capabilities to successfully convert its R&D results. Only by combining the location with local market conditions and other markets of multinational corporations (such as home country markets and markets in other countries) can the R&D globalization strategy of multinational corporations be truly reflected. Below, we will focus on analyzing the characteristics and impacts of the three main resources that influence the R&D internationalization of multinational corporations.
1. Financial resources
Financial resources include liabilities, owners’ equity and undistributed profits. For the company, these are external resources in the form of funds. Their funds The sources are creditors and shareholders, which can be divided into debt financing and equity financing. According to transaction costs and agency theory, the benefit-cost ratio of debt financing is smaller than that of equity financing. Therefore, in the process of R&D internationalization, multinational companies are more inclined to conduct equity financing in the host country, that is, joint ventures to establish R&D research institutions. The most common form is multinational corporations. The investment is in the form of cash, and the host country's government, university or research institution invests in physical form (such as land, buildings, equipment, personnel, etc.), and jointly establishes an R&D research institution controlled by a multinational company.
The debt-based financing structure will seriously restrict the progress of R&D projects. Due to the high risk and uncertainty of R&D projects, once an R&D project encounters a shortage of funds during its progress, if it does not receive timely funding Follow-up financial support is likely to fail midway. Currently, most of the world's most advanced R&D achievements are completed by multinational companies with strong financial strength. This is because large multinational companies have great influence on their global strategy and long-term considerations. R&D investment will provide unconditional financial support in the form of equity to R&D institutions in the host country.
Williamson believes that the financing method of an R&D project depends on the characteristics of the assets: equity financing is more suitable for investing in specific R&D projects, and debt financing is more suitable for investing in non-specific projects. Non-specific R&D projects are easy to be replaced, so shareholders are more willing to obtain them through sales or liquidation. Such projects generally can only obtain debt financing. Certain R&D projects are too costly to acquire, so shareholders are more willing to invest in innovation from scratch.
But for many multinational companies with abundant funds, the funds for cross-border R&D investment, including specific projects and non-specific projects, will take the form of equity financing, because many of them now appear to be non-specific. Sexual R&D projects are of strategic significance to the long-term development of multinational companies. Therefore, in the process of R&D internationalization, such multinational companies will try their best to choose equity financing methods to occupy the commanding heights in international competition. For example, Microsoft China Research Institute's main function is to provide basic theoretical research for Microsoft's R&D around the world. Its results are not mainly for Microsoft (China), but are based on the world.
In short, the relationship between financial financing and R&D internationalization is: financial financing (including debt financing and equity financing) can provide the initial source of funds for international R&D investment. As for what is suitable for debt financing and equity financing respectively? The type of R&D investment depends on whether the project is specific.
2. Material resources
In general, the larger the company, the greater the R&D investment it can undertake. However, due to differences in product life cycles and labor productivity, Medium-sized and small-scale multinational companies can still exert their unique advantages in R&D internationalization and gain a place in the R&D market.
The main advantages of large-scale multinational companies in R&D internationalization are: R&D investments are less likely to fail due to mastering a large amount of the latest basic knowledge; due to their huge market share, they can transfer R&D results Apply to a wide range of markets to obtain returns on technical capital; because there are many researchers in R&D institutions, they can effectively communicate and discuss relevant knowledge to achieve optimal results.
However, a large number of studies have shown that large-scale multinational companies have not obtained the benefits they deserve in the process of R&D internationalization due to various reasons, but those small and medium-sized multinational companies have achieved good results. R&D achievements. Small multinational companies will be more active in R&D activities and pay more attention to the efficiency and return of R&D capital investment, so they can generate market returns faster.
Due to differences in product types and life cycles, company size and R&D internationalization also present different characteristics. Large-scale multinational corporations are more willing to invest in R&D internationalization in mature products with high capital concentration and advertising concentration, while medium-sized or smaller multinational corporations are more willing to invest in mature products with low capital concentration and low advertising concentration. Conduct R&D international investment in products in the embryonic and growth stages.
In short, the relationship between material resources and R&D internationalization is: scale increases the possibility of multinational companies to invest in R&D internationalization, but in specific fields or product cycles, medium-sized or smaller multinational companies It can also gain a certain market share.
3. Intangible resources
Intangible resources refer to the company's image or the scientific and technical knowledge it possesses. From a strategic perspective, it is the most important factor for a company's R&D internationalization, because compared with other resources, intangible resources are scarce and difficult to be imitated by competitors. Of course, intangible resources are also the most difficult resources to be accurately calculated and measured by external observers because they are not reflected in written financial statements.
Intangible resources are embodied in two capabilities: the first is absorptive capability, that is, the company's ability to understand the outside world and develop new products; the second is transformation capability, that is, the company's continuous reset based on the technological opportunities generated capabilities of its product portfolio.
Intangible resources can be divided into the following two types: the first is human resources, including experience, knowledge, judgment and risk anticipation capabilities related to the company's R&D. When multinational companies conduct R&D internationalization, in addition to the financial resources and material resources mentioned above, it is more important to have a team composed of qualified researchers. Therefore, high-quality human capital is a necessary condition for multinational companies' R&D internationalization. The second is the company's image in the eyes of customers, which can often become a supplementary resource for the smooth launch of new products in R&D internationalization. For example, a multinational company with considerable visibility in its home country will launch a new product in the host country. At the same time, a good information dissemination network will enable consumers in the host country to quickly accept and recognize the product.
The degree of R&D internationalization of multinational companies is directly proportional to the size of foreign markets. A high degree of R&D internationalization can increase the company's market size and thus quickly obtain returns on R&D investment. At the same time, the increase in R&D investment returns will enable companies to increase the degree of R&D internationalization and promote greater growth in foreign market scale. Therefore, there is a benign interactive relationship between the three.
(2) Motivation of tax factors
Due to economic, political, historical, and cultural reasons, the tax systems of various countries are very different. Due to the special characteristics of R&D investment, nature, most countries have special tax policies specifically targeting R&D investment. For multinational companies to conduct international R&D, sometimes the difference in tax rates will determine the country in which the multinational company will set up its R&D laboratory. Countries have widely varying attitudes and policies towards R&D, and large multinational companies must consider the tax policies of each country when implementing their global strategies, because this will go a long way in reducing their total global R&D investment costs.
Generally speaking, multinational companies will of course give priority to countries that implement various preferential measures for R&D. However, in the actual R&D investment process, taxation is only one factor in their decision to conduct R&D internationalization. Others such as political stability , cultural coordination, consumer consumption structure and consumption ability and other factors are also factors that must be considered.
The motivation of institutional factors
Research in recent years has greatly expanded our understanding of the determinants of R&D. More and more research conclusions show that purely maximizing economic benefits (Including the maximization of short-term, medium-term and long-term benefits) It is no longer possible to provide a convincing explanation for the phenomenon of R&D internationalization. We need to analyze the R&D internationalization of multinational companies from the perspective of institutional factors (patent protection, economic openness and national culture). Analyze the motivations for change. The so-called institutional elements are a series of mixtures composed of daily habits, routines, rules, laws and regulations, etc., with the purpose of regulating the relationship between individuals and organizations. Institutions are also the rules of the game, which regulate the behavior between companies by prohibiting or encouraging R&D innovation. Some systems are artificially designed, such as patent protection and economic openness policies; others are naturally formed, such as national culture.
We divide institutional factors into three categories: patent protection, economic openness and national culture, and elaborate on the impact of institutional factors on R&D internationalization from three aspects. We use R&D intensity (the proportion of R&D expenditures in a country's GDP) as an indicator of the degree of R&D internationalization. The main reason is that R&D intensity is originally used to measure a company or a country's R&D investment, accounting for the company's sales or A quantitative indicator of the proportion of a country's gross domestic product. However, in recent years, the growth quantity and growth proportion of R&D expenditures by multinational companies in developed countries abroad have been much higher than those in their home countries, so R&D intensive The main reason for the increase in degree is the increase in the internationalization of R&D. The higher the R&D intensity, the higher the degree of R&D internationalization of multinational companies; and vice versa.
1. Patent protection
The so-called patent protection system refers to a system implemented by a country's government to protect local innovators and exclude competition from imitators. The purpose is to provide The innovator's limited monopoly (including time scope and geographical scope) protects innovation. The patent protection system can reduce the uncertainty in the process of R&D internationalization, enable the information generated by R&D to follow existing rules and tracks in the dissemination and use, allow R&D investment entities to get the returns they deserve, and enable other market entities to Use this new information in a form permitted by the system and pay the corresponding price.
The purpose of multinational R&D investors is to obtain excess economic profits, and the pricing power of products depends on the monopoly power of R&D investors. The stronger the monopoly power, the higher the excess economic profits they will obtain; however, only Only in an environment with a perfect patent protection system can we achieve super monopoly power.
Ginarte and Park used two indicators, patent rights protection index (PRP) and R&D intensity, to examine the relationship between patent protection and R&D internationalization in 1997. Quantitative analysis.
When determining the PRP, the following factors are mainly considered: the coverage of the patent protection system; the degree of participation in international patent protection agreements; the penalty mechanism; the durability of the patent protection system, through a weighted evaluation of the above factors and Summarize and obtain PRP (the value range is from 0 to 5, the larger the value, the more complete the patent protection system is).
R&D intensity uses UNESCO 1998 data.
We divide the countries in the table into three categories: Numbers 1 to 5 are the first category, representing countries with a complete patent protection system; Numbers 6 to 10 are the second category, representing the initial establishment of patent protection. Countries with systems; numbers 11 to 15 are the third category, representing countries with imperfect patent protection systems. We can clearly see that countries with perfect patent protection systems have very high R&D intensity, reaching an average of 2.6%. Patents Countries with imperfect protection systems also have very low R&D intensity, only 0.4% on average, so there is a positive correlation between patent protection and R&D investment.
2. Economic openness
We assume that international personnel mobility has a positive impact on the marginal productivity of knowledge collection; the marginal productivity of knowledge collection has a positive impact on R&D investment There is a positive impact; a country's degree of openness, such a policy variable, is very important for domestic producers to acquire international knowledge. Therefore, the more open a country's economy is, the greater the marginal productivity of the country's knowledge collection will be, and the stronger the desire for new R&D investment will be.
Since the 1990s, the liberalization of international trade and investment, global economic integration, and the innovative sharing and use of knowledge on an international scale have become the main theme of the world economy. In the context of globalization, a country's productivity and competitiveness not only depend on its own R&D, but also on the R&D of its competitors.
In order to measure the impact of a country's economic openness on economic growth, Sachs and Warner proposed a series of indices in 1995, such as average tariff levels, tariff quota ranges, export market boundaries and black market foreign exchange premiums. exchange rate premium, referred to as BMP), etc. In this article, we use BMP as a variable indicator to measure the degree of economic openness to explore the relationship between it and the internationalization of R&D investment.
BMP is a measure of foreign exchange market controls. The higher the BMP, the stricter the controls on importers, the more difficult it will be for importers to buy the advanced foreign technology products they desperately need, and the more closed a country will be to other countries.
Analyzing the results, we found that countries with a higher degree of economic openness also have very high R&D intensity, reaching an average of 2.6%. Countries with a low degree of economic openness also have very low R&D intensity, with an average of 2.6%. Only 0.8%, so there is also a positive correlation between the degree of economic openness and R&D international investment.
3. National culture
In addition to patent protection and economic openness, R&D international investment is also affected by the domestic transformation cost of foreign innovative knowledge. The higher the transformation cost, the higher the R&D internationalization cost. The lower the level of investment. So, what are the factors that affect conversion costs? First, there are always costs related to new products and new processes in an organization, that is, the value is always greater than zero; secondly, people change their existing behaviors in accordance with new technologies. Willingness depends on the attitude towards new technologies, that is, the acceptance of new things inherent in national culture.
National culture is the values ??and beliefs formed in childhood that distinguish a group of people from others. Therefore, it affects our behavior every moment every day, and can be used to explain people’s attitude toward new technologies. Attitudes towards technological R&D investment. In this article, we use PDI (Power Distance Index) as a variable index to measure national cultural characteristics to explore the relationship between it and R&D investment internationalization.
PDI was proposed by Hofstede in 1984. He conducted two large-scale surveys in 1968 and 1972 of 116,000 employees of IBM in more than 40 countries overseas. Through questionnaires, he studied these The multi-faceted national and cultural characteristics of employees have led to research results that are widely accepted by all parties. PDI measures the influence between upper-level managers and their subordinates through the degree of acceptance of middle- and lower-level employees, thereby reflecting the degree to which the decision-maker's ideas are shared and accepted by the majority of people, and the latter determines R&D international investment. important factors.
The value range of PDI is (0, +∞). The larger the value, the more closed the national culture is, and the less information exchange and ideological communication between superiors and subordinates. R&D international investment the less likely it is.
Analyzing the results, we found that countries with strong openness in national culture, and more exchanges of information and ideas between superiors and subordinates, also have very high R&D intensity, reaching an average of 2.6%. National Culture Countries with strong closedness and less information exchange and ideological communication between superiors and subordinates also have very low R&D intensity, with an average of only 0.6%. Therefore, there is also a close relationship between national cultural characteristics and R&D international investment.