The drivers of foreign direct investment into research and development: An empirical investigation

This paper examines the determinants of foreign direct investment (FDI) in research and development laboratories by 32 multinational enterprises in the pharmaceutical and electronics industries. The paper applies a dichotomous set of motives for FDI. Results from an econometric analysis of 136 laboratory investments show that relative market size and relative strength of a country's science base determine whether FDI in research and development is carried out in order to exploit existing firm-specific advantages, or in order to build up new Firm-specific advantages. This holds true in similar form for Japanese, European and U.S. firms and across the two industries.