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With the advent of globalization of production, multinationals have more international R&;D investments, especially since 1990s. The motivations of MNCs’ international R&;D investment can be attributed to various purposes, such as facilitating the local processing of products, connecting a regional production network, or adjusting the product to serve the local markets. R&;D investment abroad by MNCs stimulate foreign subsidiaries to link to local production networks and further build up their own local linkages with local material suppliers, customers, and even with research institutions in the host country. The technologies adopted by MNC foreign subsidiaries may be transferred from their parent companies, and they may also incorporate local innovation network organized by local firms. In terms of MNC, those linkages do influence on the innovation of subsidiaries and MNCs. In explaining MNCs’ overseas R&;D investment, prior research has focused mostly on local technological-related factor endowments or the knowledge spillovers in driving MNCs’ R&;D investment. The literature rarely discusses the effects of knowledge linkages in driving MNCs’ overseas R&;D investments. This has resulted in a significant gap in theory development regarding the globalization of R&;D, and the study tends to discuss the knowledge linkages and their impact on foreign R&;D investment.
Drawing on the databank of the Investment Commission, Ministry of Economic Affairs (MOEA), the study emphasizes the important effect of technology linkages in subsidiaries. We explore various foreign subsidiaries’ innovation strategies in terms of their cross-border technology linkages to see the technological knowledge source of foreign subsidiaries. The different overseas R&;D strategies adopted by MNCs’ also vary across industry sectors. From the Tobit model, the empirical examination suggests that the technology linkage effects of the corporate context have been identified influential to the subsidiary foreign R&;D investments. Meanwhile, utilization of local supply chain would also further increase the foreign subsidiaries have more connection with local research capabilities. The subsidiary has both localized production system and technology linkages to host country firms and research institution would a positive impact on R&;D investment.
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