Next to production or to technological clusters? The Economics and Management of R&D Location

This paper examines the relationship between the location of R&D and production activities. By using a sample of 799 Japanese investments in Europe, it distinguishes between affiliates performing only R&D, both R&D and production, and production only. The analysis produces two main results. First, R&D tends to locate close to production activities. Interestingly, however, the higher the science-intensity of a sector, the less important is the linkage with production. This is interpreted as the effect produced by more general and transferable scientific work, compared to applied work. Second, by performing a multinomial logit analysis, we show that R&D activities, independent or linked to production, are attracted by different local factors. Specifically, geographical proximity to the local science base is an important factor for locating only R&D laboratories compared to R&D and production, and production only. Firm and sector-specific characteristics also affect the probability of setting up an independent R&D affiliate. © 2002 Kluwer Academic Publishers.