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Internationalization of R&D Activities: Comparison of Japanese and European Mult

inational
Firms in the United States
We investigate regional difference in the degree of internationalization of R&D
and
organizational characteristics of multinational companies (MNCs) to enable absor
ptive
capability (AC) to absorb technological knowledge from the United States by Japa
nese and
European (mainly in German) MNCs. The findings show there are significant region
al
differences in organization, and suggest that MNCs are constrained for increasin
g their AC by
the national environments, in particular those related to R&D people.
INTRODUCTION
In the past few decades, the world has seen the emergence of new technologies (e
.g.,
information technology (IT) and biotechnology) that serve as key technologies ac
ross sectors.
In response to this, the management and organization of existing firms have been
changing to
exploit these new technologies and create new markets. The intensity of internat
ionalization
of R&D to exploit local knowledge has taken on increasing significance (Cantwell
and
Piscitello, 2000) whereas the internationalization of R&D has accelerated and is
concentrated
heavily in the ‘triad’, i.e., the United States, Japan and several EU countries,
with the US as a
center (Edler, Meyer-Krahmer, and Reger, 2002). There are clear differences in d
egrees of
international absorption of R&D knowledge by country, though there is considerab
le variance
within countries, suggesting scope for managerial choice (Patel & Pavitt, 1991,
1997). Japan
and Germany are lagging far behind the UK and Switzerland (Gambardella, Orsenigo
, and
Pammolli, 2000).
This paper focuses on the absorptive capability (AC) of technological knowledge
from the
United States by Japanese and European (mainly German) multinational companies (
MNCs)
in the electronics, automobile, pharmaceuticals, and chemical industries. Employ
ing the
notion of ‘absorptive capacity’ (Cohen and Levinthal, 1990)’ based on the framew
ork of the
resource-based view of a firm (RBV) and ‘dynamic capabilities’, we analyze the o
rganizational
difference between Japanese and European MNCs, which influence AC, and environme
ntal
determinants, which shape organizations within.
To remain internationally competitive, high technology based MNCs need to acquir
e and
exploit technologies globally. There is a considerable evidence that MNCs contin
ue to be
shaped by their home environments (Bartlett and Ghoshal, 1998; Porter, 1990). Wh
en they
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straddle multiple sets of national environments, they therefore need to adjust t
heir
organization to the surroundings in the host country. However, since their headq
uarters are
constrained by the home country environments, these adjustments may not be possi
ble to
enforce. With regard to AC, firms aiming to absorb technologies abroad may not b
e able to
adjust their organization to the host country because of the environmental press
ure in the
home country.
By comparing MNCs headquartered in the two regions, Japan and Europe, and their
respective home environments, this paper addresses the following questions: (1)
What
differences may exist in the degree of internationalization of R&D between Europ
ean and
East Asian MNCs?; (2) What are the differences in the organization of R&D person
nel
between European and East Asian MNCs?; (3) How may home environments differ and
influence the organizational characteristics of European and East Asian MNCs?
Our empirical analyses show that there are distinctive degrees of international
R&D among
East Asian and European MNCs. In addition, certain organizational characteristic
s regarding
R&D people have significant associations with AC in the United States. Moreover,
these
characteristics differ significantly between European and East Asian MNCs. These
results
suggest the home environments in the two regions, Japan and Europe, may influenc
e the
characteristics of firms’ R&D activities not only in the home country, but also
those abroad.
Experience of international R&D of MNCs and home national environments concernin
g R&D
people are introduced to explain the differences of MNCs by region.
This paper is structured as follows. First, the theoretical background and previ
ous studies
related to this paper are outlined. Second, the methods of this chapter are expl
ained. Third,
the empirical results of the data analysis concerning the performance of sales a
nd patent
creation in the US and organizational difference between Japanese and European f
irms are
presented. The fourth section provides environmental evidences that may be regar
ded as the
determinants of some of the organizational differences between Japanese and Germ
an firms.
Finally, the conclusion and limitations are discussed.
THEORETICAL BACKGROUND
Environments and Organizations
Environments where firms are located shape and constrain the organizations (Bart
lett &
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Ghoshal, 1998; Porter, 1990). Researchers studying ‘national innovation system (
NIS)’ argue
that national environments such as R&D organizations, government policy, educati
on system,
industry-university relationship and financial system, facilitate and constrain
the science and
technology activities within the systems (Edquist, 1997; Nelson, 1993). As the b
usiness
activities become increasingly global, how nation-state specific factors affect
the managerial
practices has emerged as an important contingency (Lewin and Kim, 2004).
Kogut (1991) develops arguments for why different national trajectories arise an
d persist and
why institutional and organizational changes may be slower than technological ch
anges. He
claims the required institutional and organizational change may be impossible to
enforce due
to the unacceptable levels of changes in underlying principals for organizing wo
rk, of which
countries differ in their application (Kogut, 1991). Certain changes may be lega
lly and
politically impossible in some countries and cultures. In the face of radical te
chnological
change outside elsewhere in the world, high technology based MNCs may be locked-
in their
home country environments and may not be able to force organizational changes (N
arula,
2002).
The critical issue hitherto arises: How and to what extent do the environments c
onstrain
organizational change in the era of radical technological change around the worl
d? In the
other words, how and to what extent can firms leverage their own firm-specific c
apabilities to
resist the environmental pressures in the home and host countries and develop th
eir own
R&D capabilities globally?
MNCs that straddle multiple institutions provide us with valuable examples to ex
amine the
relationships between national environments and organizations. MNCs’ core capabi
lities are
strengthened by their home country environments (Porter, 1990). Yet, when they o
perate
abroad, they are required to adjust their organization to the surroundings in th
e host
countries. Some adjustments are possible to manage, but some may prove to be dif
ficult or
impossible due to irresistible environmental pressures in the home country that
constrain
MNCs. This paper deals with the fundamental issues concerning this interplay bet
ween the
national environments and organizations.
Absorptive Capacity
‘Absorptive capacity’ provides a useful perspective for an analysis of the capab
ilities of firms to
absorb technologies from external sources abroad. ‘Absorptive capacity’ is one o
f the most
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important constructs to emerge in organizational research over the past decades
(Lane, Koka
and Pathak., 2002), and it has been explored and utilized by various researches
in the past at
an individual level, at an organizational level or at a national level. Accordin
g to Cohen and
Levinthal (1990), ‘absorptive capacity’ is the ability of a firm to recognize th
e value of new
external information, assimilate it, and apply it to commercial ends. This capac
ity is largely a
function of the firm’s level of prior related knowledge.
Employing the nation of ‘absorptive capacity’, this paper uses the term ‘absorpt
ive capability
(AC)’ to refer to the capability of absorbing technological knowledge from the U
nited States.
Established companies try to increase ‘absorptive capacity’ when facing the emer
gence of
technologies they lack internally. However, firms are constrained by their own i
nternal and
external factors such as histories, paths, organizational structures, and shifti
ng environments
in home and host countries. Nevertheless, some firms are capable of influencing
environments
as well as changing organizations with strategies that reconcile internal and ex
ternal factors
(Patel and Pavitt., 1991, 1997; Teece, Pisano and Shuen, 1997).
Absorptivbsorptive Capability of MNCs
As to the issue of absorption of technological knowledge across national borders
, some
researchers use patents or scientific papers to analyze it at a country and sect
or level
(Cantwell and Piscitello, 2000; Patel and Pavitt, 1997). Less research has, howe
ver, been done
at the level of the firm. Studies whose main focus is on international R&D manag
ement have
dealt more with issues of motivation, location choices and roles of subsidiaries
. The research
on technology sourcing by MNCs has focus on the levels of subsidiary or firm (Al
meida, 1996;
Frost, 2001). However, they barely touched on the transfer and combination of th
e sourced
knowledge within MNCs. Research on comparative management and international busi
ness
has tended to focuses on governance forms and task structure (Lam, 1997); knowle
dge
transfer within MNCs has become a subject of study only recently. Thus the organ
izational
and managerial implications of AC including internal knowledge combination and u
tilization
to managers of MNCs have hardly been investigated.
Arai and Barron (2005) argue that AC consists of four capabilities, acquisition,
combinative,
independence and utilization capabilities (See Appendix 1 for the definition of
each capability).
They found interrelations between them as shown in Figure 1 (Arai and Barron, 20
05).
Interestingly, there is no significant correlation between acquisition capabilit
y (share of
patents relying on US knowledge) and utilization capability (proportion of sales
of a firm in
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the US). Instead, the result shows a significant positive association of combina
tive capability
with utilization capability, which suggests the critical role of intensive colla
boration in the
integration of home and US knowledge and in bringing about high economic perform
ance in
the US market. In addition, the significant positive correlation of independence
capability
with acquisition capability implies the importance of the autonomy of US subsidi
aries in
improving the acquisition of US knowledge. Overall, the results suggest that bot
h combinative
and independence capabilities are critical to AC and that there may be a mediati
ng effect of
combinative capability and independence on the relationship between utilization
capability
and acquisition capability (Figure 2).
-----------------------------------------------
Insert Figures 1 and 2 about here.
-----------------------------------------------
Arai (2006) further found that most of the organizational characteristics of MNC
s associated
with combinative and independence capabilities contrast whereas some of those re
garding
human resources at the corporate R&D centers have significant correlation with b
oth
capabilities in the same directions. This implies that R&D people of a firm may
play a critical
role directly and indirectly in the successful absorption of technological knowl
edge from
abroad. Given these results, this study aims to compare East Asian (mainly Japan
ese) and
European (mainly German) MNCs, paying particular attention to their degree of
internationalization, organizational differences affecting AC, and environmental
effects on
these organizational differences.
METHODS
Research Setting
These hypotheses are tested in the context of the R&D activities of East Asian (
Japanese and
Korean) and European (German, Swiss, Dutch, Swedish and Finnish) MNCs that carry
out
R&D in the US as well as in their home countries. All the countries where the MN
Cs are
headquartered are members of the OECD and invest a high percentage of their GDP
in R&D.
These countries share national borders or similar backgrounds culturally and his
torically. The
unit of analysis is the R&D organization of individual firms. The firms were sel
ected from the
electronics, engineering, chemical and pharmaceutical industries. Firms in these
industries
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have relatively high R&D intensity (R&D expenditure/sales).
Sample
After choosing the home countries of firms to be sampled, we identified the popu
lation of the
potential sample firms to be studied from the lists that ranked firms of each co
untry or by
sector worldwide (e.g., OECD Outlooks, ‘Shushoku-shiki-hou WEB’, ‘Die Zeit’, ‘Wo
rld
Investment Report 2002). Then we chose the firms with which we had prior contact
s or
potential contacts through mediating people or organizations such as industrial
organizations
and research institutes. These personal contacts and introduction by local netwo
rks were very
important because of the sensitivity of the subject of R&D activities. Then we m
ade
exploratory semi-structured interviews.
After this process, we invited the selected firms to participate in a survey tha
t included
interviews and questionnaires. More than 50 firms expressed initial interest and
were visited
at least once to conduct structured interviews. Out of these firms, nearly 40 fi
rms completed
the questionnaires at their headquarters or main corporate R&D centers in 2003 o
r 2004.
Patent information for these firms was collected through the European Patent Off
ice (EPO).
To compare AC by region, 47 firms that we interviewed at least once and had pate
nt data good
enough for comparative analysis are included (Table 1). For the analysis of the
questionnaire
items that relate to human resources, 33 firms are included (Table 2). These 33
firms had both
reliable responses to the questionnaires and patent data. The firms analyzed in
the human
resources questionnaire represent four nationalities: Japanese, German, Swiss an
d Dutch.
----------------------------------------------
Insert Tables 1 and 2 about here.
----------------------------------------------
Data
We use five sets of data: 1) responses to the questionnaires, 2) interviews, 3)
public company
data regarding sales and R&D, 4) patent data, 5) government data at a country le
vel. The
public company data were gathered from their special reports to the national aut
horities of
the stock markets or US authorities as well as from their annual reports. When t
hese data
were not included in published reports, enquiries were made to each company dire
ctly.
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As regards interview information, we conducted extensive semi-structured intervi
ews with
over 160 managers (1 to 8 people from each firm) in the Japanese and European fi
rms in the
three regions, Japan, Europe and the US, from 2001 to 2002. The primary objectiv
e of the
interviews was to explore and understand the factors managers believed to be imp
ortant
because the international R&D activities at a firm level with respect to organiz
ation and
management were still poorly understood. The exploratory interviews were followe
d by
conceptual ordering. As a result, five major organizational elements were elucid
ated: types of
R&D activities, decision making, external relationships, human resource, knowled
ge sharing,
control and coordination.
From the summer of 2003 to 2004, the questionnaire was administered to senior ma
nagers at
the corporate R&D centers in the home country. These managers were generally at
the level of
reporting directly to the Chief Technology Officer (CTO) or his/her deputy. The
constructs and
each question in the questionnaires were based upon the extensive prior intervie
ws. The
questionnaires contain the five major elements of organizational characteristics
identified
during the exploratory interviews. They cover not only R&D units, but also other
functional
units. Some questions on organization were prepared to double check and confirm
the validity
of the results from different aspects. Prior to the survey, the questionnaires w
ere tested by a
few researchers and engineers in pharmaceutical and electronics industries we ha
d a close
contact with.
Patent data are the main source of information used to track technological innov
ations in the
dispersed R&D locations of the Japanese and European MNCs in this study. The pro
pensity to
patent differs across industries, however, and some firms are less interested in
filing patents,
which makes it difficult to compare the success at developing inventions of firm
s by means of
patent data (von Hippel, 1994). Nevertheless, large MNCs, particularly those in
the industries
we study, file patents vigorously enough for researchers to use patent data to a
nalyze their
R&D activities (Patel & Pavitt, 1997).
We analyzed a total of 613,583 patents that were granted to the 47 companies (in
cluding
their consolidated subsidiaries) in the study. These were the patents filed betw
een 1995 and
1999, either with the United States Patent and Trademark Office (USPTO), World
Intellectual Property Organization (WIPO), EPO or the national patent offices of
the countries
where the firms’ headquarters are located. Because MNCs often subsequently file
patents for
the same invention in several countries, we used only the first-filed patents in
order to avoid
double or triple counting. These data were selected by the EPO, which has all th
e patent data
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filed in the patent offices listed above. The numbers of patents granted for the
same number of
inventions differ in the patent systems of each region and country. Therefore, w
e scaled down
the number of Japanese and Korean patents by a factor of 4.9 to re-evaluate the
volume of
inventions1.
We chose the patents whose priority date (i.e., the date a patent application wa
s filed in
any country that has signed the Paris Convention) was between 1995 and 1999. The
se dates
were chosen primarily because of comparability of patent data as follows. The fi
rst reason is
the time lag between inventions and market performance. The average time lag var
ies across
sector. However, it takes at least three to four years according to the intervie
wees. Since the
sales were measured as of 2002, we decided to include patents first filed until
the end of 1999.
Second, firms’ patent strategy had evolved since the early 1990s. German firms,
in particular,
increased their patent filings despite the stable R&D expenditure during the sam
e period.
Third, Japanese firms became more intensive in their internationalization in the
1990s, while
some companies, particularly in small countries, started to internationalize the
ir R&D
activities much earlier (Kuemmerle, 1999). For the last two reasons, it was nece
ssary to limit
data filed after 1995.
1 To deal with the problem of varying numbers of patents per invention, Eaton an
d
Kortum (1999) used a factor of 4.9 to scale down domestic patents in Japan based
on the
analysis of Okada (1992). Using the data on the number of claims of inventions,
Okada
finds that Japanese patents granted to foreigners contain on average 4.9 times a
s many
inventive claims as those granted to Japanese inventors, and others all have a s
imilar
average number of claims per patent. In addition, according to the study of EPO,
the
factor to scale down Japanese patents should be between 3 and 5. In addition, th
e
Korean patent system is very similar to the Japanese one due to their historical
assimilation of every Japanese policy, which was confirmed with the experts in t
he
patent issue. Hence it is assumed the Korean patents have a similar tendency to
those
of the Japanese. Therefore I tested the factors of 3 and 4.9, and the principale
results
were same.
Okada, Y. 1992. Tokkyo Seido no Ho to Keizaigaku (The Law and Economics of the
Patent System), Staff paper, Shinshu University. Shinshu. Eaton, J. & Kortum, S.
1999.
International Technology Diffusion: Theory and Measurement. International Econom
ic
Review, 40(3): 537-570.
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STATISTICAL RESULTS
This section reports the statistical analyses of the patents, sales, and questio
nnaires, which
show the regional difference between Japanese and European (mainly German) MNCs.
Comparison of patents and sales between European and East Asian MNCs
This section presents the analyses of patent and sales of 47 MNCs. Table 3 shows
the means of
key variables by region and industry. On average, compared in the same industrie
s, European
MNCs have higher annual turnover, R&D expenditure and R&D intensity, and US mark
et
share as a fraction of the total sales of a firm (USM) than their Japanese/Korea
n counterparts.
Their share of R&D staff in the US is also higher. USM and R&D intensity are sli
ghtly higher
for pharmaceutical and chemical industries in both regions, although turnover an
d R&D
expenditure are higher for electronics and automobile industries. The Japanese/K
orean
electronics and automobile firms have a higher percentage of expatriates in thei
r US R&D
centers on average.
------------------------------------
Insert Table 3 about here.
------------------------------------
To examine the statistical regional (East Asia and Europe) difference in the sha
re of R&D
people in the home country as well as the capabilities comprising ACUS, USCC and
USOL, we
used ordinary least square (OLS) analysis controlled by three variables: sector,
R&D
expenditure (RDE) and R&D intensity (RDI). These variables were chosen as contro
ls for the
following reasons. Researchers have recognized differences in AC by industry (Ca
ntwell and
Piscitello, 2000; Patel and Pavitt, 1997). Therefore this study also uses indust
ry
(electronics/automobiles vs. pharmaceuticals/chemicals) as a control variable. A
s for RDE,
firms need internal R&D capability to assimilate external R&D knowledge. Prior r
esearch
finds firms’ R&D investment increases acquisition of external technologies (Lim,
2004;
Rosenberg, 1990; Veugelers, 1997). Thus firms’ total RDE is expected to influenc
e positively
the absorption of US knowledge.
In addition, the RDI of a firm is included to capture the differences in firms’
commitment to
developing their knowledge base. Applied economists believe there are three clas
ses of
industry-level determinants of RDI: demand, appropriability and technological op
portunity
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conditions (Cohen and Levinthal, 1989). Cohen and Levinthal (1990) used the same
measure
as a proxy for a firm’s absorptive capacity. Thus including this measure enables
us to better
assess the interrelationships between various capabilities being independent of
the total AC.
Factor analysis, including the variables of the four capabilities as well as RDE
, RDI, total
annual sales and total employees of a firm, tells us that RDE, total annual sale
s and total
employees, belong to one of three components whereas RDI is in another, and all
the other
variables are in a third component. Thus by including RDE, the size of a firm in
terms of total
annual sales and total employees is taken into consideration to some extent.
The result of the regression shows that the proportion of R&D people at corporat
e R&D
centers in the home country of all those in the world is significantly higher (a
t the 0.01 level)
for the Japanese MNCs (78.7% on average) than the Europeans (70.5% on average) (
The
parameter estimate is 0.306 when Japan is 1 and Europe is 0.). The European firm
s have
much more globally dispersed R&D centers than the Japanese, which coincides with
the
finding below that there are a significantly higher proportion of foreign nation
alities and more
diverse inventors’ nationalities in the European firms’ patents.
With regard to the patent performance, the statistical results (OLS) show that t
he capabilities
comprising AC of the Japanese/Korean firms are significantly lower than that of
the European
counterparts except for utilization capability (Table 4). Acquisition capability
(at the 0.1 level),
combinative capability (at the 0.1 level) and independence capability (at the 0.
01 level) of the
Japanese/Korean firms are all significantly lower than that of the European firm
s.
------------------------------------
Insert Table 4 about here.
------------------------------------
The difference in independence capability suggests that the European firms allow
more
autonomy to their R&D subsidiaries in the US than the Japanese/Korean firms. Thi
s may be
at least partly explained by the difference in entry mode: the Europeans rely mo
re on ‘M&A’ in
general than Japanese firms (Kuemmerle, 1999; Arai, 2006). Consequently US subsi
diaries
are less integrated and more independent from the headquarters. Another reason m
ay be that
Japanese/Korean firms are not usually engaged in the types of R&D that requires
substantial
autonomy of US R&D people to explore new possibility by themselves.
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A previous study found that there is a significant positive correlation between
combinative
capability and utilization capability when both European and Japanese /Korean fi
rms are
included (Arai and Barron, 2005). However, it is not so when only Japanese/Korea
n firms are
examined. In addition, this study finds that Japanese/Korean firms have a signif
icantly lower
level of combinative capability than Europeans. This means these East Asian firm
s can attain
a high share of sales in the US without combining home knowledge with that of th
e US.
This may imply that Japanese and Korean firms intentionally try to separate the
home and
US R&D more than the European firms because their culture, languages, and ways o
f R&D
are more distant from those of the US. Japanese/Korean firms may make more effor
t to divide
the work into modules in order to share it between the home country and the US b
ecause it is
more difficult for Japanese/Korean firms to co-operate with the US people in the
case for
European firms. In general, Asian firms have less R&D experience in the US than
Europeans,
as we discuss later. Hence, they may not know how to integrate US and home count
ry
knowledge. It is possible that they may become more like their European counterp
arts in
developing synergies between the home and US R&D people to increase US sales as
they
accumulate experience in the future.
Zooming into the composition of acquisition capability (share of patents that ha
ve American
inventors of all the patents of a firm filed in any of the patent offices listed
 above), the
European firms have more diverse combination of US knowledge with that of other
nationalities than the Japanese/Korean firms as shown Fig. 3, 4, 5, and 6. The o
ther
nationalities are mostly other Europeans.
-------------------------------------------------------
Insert Figures 3, 4, 5, and 6 about here.
-------------------------------------------------------
Whether the R&D network of European firms is truly integrated or not (Bergek and
Berggren,
2004), this indicates more complex integration of knowledge of the European MNCs
whose
subsidiaries in other European countries interact directly with US subsidiaries.
On the other
hand, the R&D of their East Asian counterparts is more concentrated on the home
country,
and their international R&D activities are primarily focused on the US. This is
consistent
with the results of other researchers argued (von Zedtwitz and Gassmann, 2002).
There seems
to exist a clear regional difference between European and East Asian firms not o
nly in the
degree of acquisition of US knowledge, but also in the patterns of combination o
f inventors
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with various nationalities.
Comparison R&D People at the Corporate R&D Centers
between European and East Asian MNCs
This section presents the results of a questionnaire survey regarding R&D people
at the
corporate R&D centers of 33 European (mainly German) and Japanese MNCs listed in
Table 2.
In the questionnaires, respondents were asked to give the percentage of R&D peop
le at
corporate R&D centers in the home country of all the R&D staff at corporate R&D
centers in
the world. They were also asked the proportion of R&D staff with various attribu
tes at
corporate R&D centers in the home country, such as ‘academic degrees’, ‘foreign
citizenships’,
‘gender’, ‘postdoctoral experience’ and ‘working experience in other firms’ usin
g 5-point Likert
scales.
We rely on the questionnaire survey to analyze the difference of R&D people’s at
tributes
between Japanese and European firms. For the dependent variables derived from th
e
questions based on Likert scales, ordinal logistic regression (sometimes known a
s the ordered
logit model) is used to obtain parameter estimates of an independent variable, r
egion (Japan
and Europe). Although it is common practice to use OLS analysis with data of thi
s type, it is
more appropriate to rely on ordinal logistic regression2.
The statistical results show that the European firms have a significantly higher
proportion of
R&D staff with ‘foreign citizenship’, ‘foreign citizenship hired in the last thr
ee years’, ‘doctoral
degrees’, ‘foreign degrees’ and ‘postdoctoral experience’ than the Japanese (Tab
le 5). There is
no significant regional difference in ‘gender’ and ‘staff hired in the last thre
e years without
working experience’.
------------------------------------
Insert Table 5 about here.
------------------------------------
2 It is more appropriate to rely on ordinal logistic regression for a number of
reasons.
First, the OLS method involves the assumption that the dependent variable has a
normal distribution, but this clearly cannot be the case when the variable is or
dinal.
Therefore OLS will not be an efficient estimator. Second, OLS may produce predic
ted
values that are beyond the actual range of the scale (that is, less than 1 or gr
eater than
5). We obtained the estimates by using maximum likelihood estimation as implemen
ted
by SPSS.
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As explained above, the previous study revealed that, while most of the organiza
tional
characteristics other than human resources have contrasting associations with co
mbinative
and independence capabilities, several attributes of human resources such as ‘fo
reign
citizenship’ and ‘post-doctoral experiences’ at the corporate R&D centers in the
home country
have significant associations with the two capabilities in the same directions:
The
characteristics of ‘foreign citizenship’, ‘foreign citizenship hired in the last
three years’, and
‘doctoral degrees’ have a significant positive association with one of the two c
apabilities
whereas the characteristics of ‘gender’ and ‘new graduates without working exper
iences’ have
no significant correlation with any of the capabilities (Arai, 2006).
Therefore, the findings of this study concerning the regional difference (in ‘fo
reign citizenship’,
‘foreign citizenship hired in the last three years’, ‘doctoral degrees’, ‘foreig
n degrees’ and
‘postdoctoral experience’) suggest the European firms have more R&D people with
attributes
that can directly or indirectly contribute to enhancing AC than Japanese firms.
These results
raise the question of why there are such differences between European and Japane
se firms?
The next section deals with this question.
NATONAL ENVIRONMENTS IN THE US, GERMANY AND JAPAN
This section aims to explain how the experience of international R&D of MNCs and
the
historical background and national environments in the US, Germany and Japan may
have
influenced the regional difference in the degree of international R&D and charac
teristics of
R&D staff of European and Japanese MNCs, which are identified above. The followi
ng
sections aim to explain the national environments in each country.
GDP, Population and Industry
With regard to the size of each country, The GDPs (Gross Domestic Products) of t
he US,
Germany and Japan are 5563, 1967 and 3885 (constant 1995) US billion dollars res
pectively.
The populations are 28.5 (US), 8.2 (Germany), and 12.7 (Japan) million. The GDP
per capita is
largest in Japan, 44,457(constant 1995 US billion dollars), followed by Germany
(32,813) and
the US (31,592). As for the industrial structure of the three countries in terms
of the GDP and
employment, the second industry is more prominent in Germany (GDP, 31.9%; employ
ment,
34.3%) and Japan (GDP, 37.1 %; employment, 33.0%) than in the US (GDP, 25.2%;
14/14
employment, 24.2%). The US, on the other hand, has the largest shares of the GDP
and
employment in the third industry. The share of manufacturing sector in GDP is ve
ry similar
between Germany (GDP, 23.6%) and Japan (GDP, 24.3%), and it is much higher than
in the
US (GDP, 17.0%). These indicate that the industrial structures, at least with re
spect to the
second industry and manufacturing sector, in Japan and Germany are more similar
to each
other than that of the US.
Experiences of International R&D
History and recent changes of international R&D. Internationalization of science
and
technology dates back to ancient times. We find evidence of inter-relationships
among
civilizations from the era of the four great civilizations in the world. The tra
nsfer of industry
related to knowledge was observed before and after the first industrial revoluti
on in Europe in
the eighteenth century. In the past few centuries, the technological hegemony ha
s moved from
country through country in Europe and the US (Yakushiji, 1989). The flow of scie
ntific and
technological knowledge between countries has become more and more intensive as
the
number of industrialized states has increased. Whenever a country began to indus
trialize and
to emerge as a significant economic power, they imitated, exploited, and accumul
ated the
knowledge of leaders in a variety of ways.
The internationalization of R&D has become increasingly significant in the past
few decades,
particularly in response to the rapid rise of new technologies. Large incumbent
firms are
incrementally shifting and expanding their competence through collaboration with
other high
technology based firms and universities, including those based overseas. They do
not
necessarily just expand their expertise in their own central laboratories as the
y did before.
This is in part because it is difficult or expensive for firms to enhance their
in-house
capabilities rapidly in new areas of research. It is also because they want to w
ait and see the
progress and profitability of new technologies in light of their business during
the initial
trial-and-error or pre-paradigmatic period. A rapidly growing number of R&D rela
ted
alliances, mergers, joint ventures, and strategic partnerships on a global scale
as well as of
foreign direct investment in R&D have been observed especially in the 1980s and
1990s. The
literature shows that these are heavily concentrated in the triad: the US, Japan
and a few
countries in Europe (Edler, Meyer-Krahmer, and Reger, 2001)
Organizational forms. At the level of the firm, as Gerybadze and Reger (1999) su
ggest, in
the process of internationalization of R&D, the change of management has resulte
d in new
15/15
organizational forms, stronger cross-functional integration, and boundary-spanni
ng
innovation processes. Past studies have developed various taxonomies for interna
tional R&D
units, such as ethnocentric centralized R&D, geocentric centralized R&D, polycen
tric
decentralized R&D, R&D hub model, integrated R&D though they have not achieved t
o show
a comprehensive model for organizational change in R&D organizations (Gassman an
d von
Zedtwitz, 1999). These studies have been particularly weak in assessing whether
there is any
association between types of organizations and performance.
With regard to regional differences in the organization of the global R&D units
of MNCs,
researchers have usually categorized most European large MNCs into a decentraliz
ed model
and most Japanese large MNCs into a decentralized model (e.g. Gassman and von Ze
dtwitz,
1999, 2000; Gerybadze and Reger, 1999). They argue most Japanese firms have not
yet
developed an organizational capability suitable for managing international R&D t
o utilize
globally dispersed knowledge (Gassman and von Zedtwitz, 1999, 2000; Gerybadze an
d Reger,
1999).
Foreign direct investment (FDI) in R&D. With regard to outward R&D investment, U
S
firms are pioneer investors in R&D facilities abroad, while European firms’ inve
stment
reached US levels in the late 1970s. Since the late 1980s, Japanese firms have i
ncreased their
overseas R&D activities (Jungmittag, Meyer-Krahmer and Reger, 1999). The United
States is
a significant recipient country for foreign R&D expenditure (Jungmittag, Meyer-K
rahmer and
Reger, 1999). Many industrialized countries, including Japan and Germany, extend
ed their
R&D activities in the 1990s (Science and Engineering Indicators, 2004). Accordin
g to
Jungmittag, Meyer-Krahmer and Reger (1999), the great increase of German firms’
R&D
expenditure from 1994 to 1995 is primarily explained by the boom in acquisitions
, particularly
in the pharmaceutical industry.
Regional comparison shows that European firms’ R&D investment in the US is much
greater
than that of Japanese (Figure 7). Taking into account the size of the countries
(Table 6),
Germany has a higher proportion of their R&D investment in the US than Japan. Mo
reover,
firms from smaller countries such as Switzerland and the Netherlands have a much
higher
proportion of their R&D investment in the US than their European counterparts in
Germany.
--------------------------------------------
Insert Tables 6 and 7 about here.
--------------------------------------------
16/16
-------------------------------------
Insert Figure 7 about here.
-------------------------------------
The data on the inward R&D investment, on the other hand, shows that the proport
ions of
investment by foreign firms in the US, Germany and Sweden are almost equivalent
(US,
15.3%; Germany, 15.9%; Sweden, 14.0%) while it is only 5.2% in Japan and is as h
igh as 25.8%
in the UK and 67.0% in Ireland (Jungmittag, Meyer-Krahmer and Reger, 1999). Jung
mittag,
Meyer-Krahmer and Reger (1999) argue that the share of foreign R&D is especially
high in
those countries in which foreign enterprises are strongly represented in manufac
turing
industry. Japan and Germany have a similar share of manufacturing industry in th
eir GDP
and employment (Table 7), so the difference of inward FDI in R&D is not probably
due to this
bias.
Inventors of Patents. The analysis of inventors’ addresses, shown on patents, al
lows us to
investigate the location of sources of knowledge that firms acquire. A t a count
ry and sector
level, a number of researchers reported a large difference in the degree of acqu
isition of
foreign knowledge by firms (e.g., Cantwell and P; Criscuolo, 2004; Gambardella,
Orsenigo and
Pammolli, 2000). Criscuolo, (2004), for example, shows the varying degrees of
internationalization of R&D by region and sector from the patent data of firms l
isted in the
Fortune 500 (Table 8).
-------------------------------------
Insert Table 8 about here.
-------------------------------------
Generally speaking, Japanese firms have a far higher proportion of inventors in
the home
country compared to European counterparts. The average percentage of US inventor
s of
European pharmaceutical companies is 38.7%. However, that of firms in the automo
bile
industry is small (Europe, 5.5%; Japan 0.80%) compared with compared with other
high
technology industries. This suggests that European and Japanese automobile firms
still rely
primarily on technological competence in their home country, which is more advan
ced than
that in the US.
For a specific case of MNCs engaged in biotechnology, Gambardella, Orsenigo and
Pammolli
17/17
(2000) report that several British and Swiss firms have most aggressively exploi
ted
biotechnology in the US. On the other hand, German, French and Italian firms app
ear to be
slower, and Japanese firms lag far behind. Large Japanese pharmaceutical compani
es have
been particularly slow to embrace the new technologies. Interestingly, the most
substantial
investment of Japanese firms in biotechnology has been made by firms with histor
ical
strengths in fermentation-based industries (Henderson, Orsenigo, and Pisano, 199
9). Out of
the top 30 companies world-wide, Swiss firms account for 49.7% of patents with U
S inventors
that were filed in the US, while the share is lower for British (21.3%), German
(17.8%), and
Japanese firms (1.9%), although there is a bias from the number of firms include
d in the
sample and country size (Gambardella, Orsenigo and Pammolli, 2000).
Human Resources for R&D Activities
R&D people with doctoral degrees The number of people with doctoral degrees may
be one
of the critical factors that sustain high levels of R&D activity in high technol
ogy based
industries. This may be particularly important in rapidly changing technological
fields that
require strong linkage with basic science. The statistical results of the questi
onnaires and
patent analysis show the percentage of doctorates among R&D people at corporate
R&D
centers in the home country has a significant positive association with independ
ence
capability (Arai, 2006). They also show the percentage of people with postdoctor
al experience
at corporate R&D centers in the home country has a significant positive associat
ion with both
independence and combinative capabilities (Arai, 2006). Thus a shortage of quali
fied R&D
people with advanced degrees may limit the acquisition of technological knowledg
e from
abroad as well as R&D activities of high tech firms in the home country.
The numbers of doctoral degrees obtained by field vary across the US, Germany an
d Japan as
shown in Table 9. In natural science, Germany has the largest number of doctoral
degree
obtained per 10,000 (0.726) in 2001, which is followed by the US (0.312) and Jap
an (0.125). In
the field of biology, Germany also has the greatest number of doctoral degree ob
tained among
the three countries, but the number in Germany fluctuated in the 1990s while the
US and
Japan have increased the numbers steadily during the same period (Table 10). The
se suggest
that the national environment in Germany is more favorable for MNCs to recruit n
ew
qualified graduates than in Japan.
---------------------------------------------------------
Insert Tables 9 and Table 10 about here.
18/18
---------------------------------------------------------
Foreign students and researchers in the home country and the US. Foreign student
s in the
home country of MNCs are sources of new foreign employees for firms. The empiric
al results
show the proportion of R&D staff with ‘foreign citizenship’ has a significant po
sitive
correlation with combinative capability, and the proportion of those with ‘forei
gn degree’ has a
significant positive correlation with both combinative and independence capabili
ties. A large
number of foreign students in the home country can increase the possibility of h
iring foreign
R&D staff and indirectly enhance firms’ AC. The proportions of foreign students
in higher
education in the three countries vary substantially: US (3.5%), Germany (9.6%) a
nd Japan
(1.6%). With respect to the foreign students in the US, the proportion of foreig
n students at
the top universities such as Stanford University, Harvard University, and MIT by
home
country is consistent with the national average (Appendix 2).
The majority of foreign students in Germany are from Turkey or other European co
untries,
while those in the US and Japan are mostly Asian3. The national backgrounds of f
oreign
students may be similar in Japan and the US, but the quality and rate of stay af
ter
graduation of those students may differ between the two countries according to s
everal
informants at the Ministry of Education, Culture, Sport, Science and Technology,
Japan
(MEXT) and at Japanese universities. An official at the MEXT informed:
The national goal of receiving 100,000 overseas students has been achieved since
a few years
ago. Now it is time to focus more on the quality of the students rather than qua
ntity. We want
more students from Asia with high academic quality, but we hear the best student
s tend to go
to the United States. The students prefer American universities because of the l
anguage,
future job opportunity, and conditions at universities. It is often complained t
hat the Japanese
universities are less open than American universities and are not well prepared
to educate
international students.
The result of the survey of the MEXT to higher education institutions shows ther
e are only
103 foreign graduate students in Japan who had an internship experience in the f
iscal year
2004, while in the US and Europe internship for graduate students is much more c
ommon.
3 Share of foreign students in each country as of 1998: US, 3.5% (China, 9.8%; J
apan,
9.8%; Korea, 8.9%; India, 7.0%; Canada, 4.6%); Germany, 9.6% (Turkey, 15.7%; Ira
n,
5.2%; Greece, 5.0%; Austria, 4.0%; Italy, 4.0%; Poland, 4.0%); Japan, 1.6% (Chin
a, 45.6%,
Korea, 33.0%, Malaysia, 3.7%) (Source: ‘International Mobility of the Highly Ski
lled’,
OECD, 2001)
19/19
This indicates that it is more difficult for foreign students to find a job in J
apan than in
Europe even if they wanted. In addition, Japanese managers said Japanese firms w
ere very
reluctant to hire foreign researchers and engineers because foreign employees te
nded to leave
their firms and go back home before long.
There are more Japanese graduate students in US universities than Germans (OECD
Education database). This indicates that Japanese MNCs in the US are more likely
to be able
to hire new staff with US academic degrees. However, the number of foreign-born
US
researchers with science and engineering doctorates born in Japan is smaller tha
n that of
Germany (Table 11). This may be partly because the number of Japanese students h
as
increased relatively recently compared with that of Germans. It may be also beca
use German
R&D people are more likely to stay in the US after graduating from the US univer
sities or
there may be more German immigrants with doctoral degrees into the US than Japan
ese.
--------------------------------------
Insert Table 11 about here.
-------------------------------------
The R&D staff that can understand practices both in the US and home country may
improve
the connectivity and facilitate communication and understanding between the head
quarters
and subsidiaries. The larger number of German researchers in the US than Japanes
e may
suggest that R&D subsidiaries of German MNCs have a greater advantage over their
Japanese counterparts because there are more German R&D people who can be hired
locally
in the US.
International scientific collaboration. International collaboration in the area
of basic
science among researchers can provide a basis for international R&D activities o
f MNCs. For
example, it promotes the networking among scientists across national boundaries,
which gives
firms valuable formal and informal information and contacts of other countries;
contributes to
harmonizing research terms and methods; and, very importantly, helps educate and
train
internationally competitive new graduates.
The proportions of internationally coauthored articles differ among countries: U
S (23.2%),
Germany (41.2%), and Japan (19.7%) (Table 12). From 1994 to 2001, the shares hav
e
increased for all the three countries: US (7.4%), Germany (11.1%), and Japan (6.
0%). German
authors have the greatest proportion, but the percentage of articles coauthored
with US
20/20
researchers is smaller (29.9%) than that of Japan (42.8%). Between 1994 and 2001
, Japanese
coauthored articles with US people grew from 19.7% to 42.8% while the share of G
erman-US
coauthored articles remained almost same.
--------------------------------------
Insert Table 12 about here.
-------------------------------------
This is because German researchers collaborate extensively with researchers in o
ther
European countries. Thus the share of coauthored articles by region is consisten
t with the
results that European MNCs have much more extensive R&D network in other Europea
n
countries than Japanese. It is probable that the strong science base interweavin
g multiple
European countries contributes to the internationalization of R&D activities of
European
MNCs.
CONCLUSION
Prior research has suggested that the difference in the degree of internationali
zation of R&D
reflects the technological capability and size of home and host countries (Geryb
adze and Reger,
1999; Criscuolo, 2004). This study further investigates: (1) How components of A
C differ by
region by looking into inventors’ addresses; (2) How organization of MNCs concer
ning R&D
people differ by region; (3) How national environments besides the technological
capability
and size of home and host countries may hinder MNCs from transforming their orga
nizational
characteristics mainly with respect to R&D people. Specifically, we looked into
three
environmental factors: (1) qualified R&D people (doctoral candidates and foreign
students in
universities) in each country; (2) availability of researchers with doctoral deg
rees who were
born in the home country of MNCs and work in the US; and (3) international colla
boration in
the field of basic science.
The investigation of national environments indicates Japanese firms are more dis
advantaged.
First, there are fewer qualified researchers with doctoral degrees and foreign r
esearchers who
have studied in Japan than in Germany. Second, there are fewer researchers with
doctoral
degrees who were born in Japan and work in the United States than those born in
Germany.
With regard to the international collaboration in the field of basic science, Ja
panese
researchers have substantial linkage with US researchers, but the cooperation is
heavily
21/21
concentrated on the US. This suggests Japanese MNCs may face difficulty in diver
sifying
their R&D activities in other countries besides the US.
Since these environmental factors are usually beyond control of MNCs, it provide
s an
important implication to the policy makers, especially those responsible for hig
her education.
It may be more necessary for governments to encourage scientific collaboration w
ith other
nations as well as to increase graduates with doctoral degrees and foreign stude
nts in certain
fields of technologies. It should allow MNCs to hire these R&D staff am improve
their
capability not only to develop technologies in the home country, but to absorb t
echnological
knowledge from abroad.
The major limitations of this paper are as follows. First, the relatively small
sample lowers the
power to investigate inter-correlations between some of the variables. In additi
on, for more
accurate analyses, it may be necessary to analyze the data controlled by technol
ogy and
country although it is controlled by industry and region in this study. The prod
ucts that utilize
the patent inventions vary from technology to technology as well as the period f
rom R&D
investment to inventions. It will require a much larger patent data set and samp
le size, which
we did not have for this study as firms that can afford to establish corporate R
&D centers in
the US are very much limited. The results are, however, significant for some var
iables and
allowed us to test the hypotheses.
The second limitation is the time lag between the questionnaires conducted in 20
02 and
patent filed in 1995-1999 though some questionnaires asked about the situation i
n 1997.
Organizational characteristics in the late 1990s may have evolved toward 2002. T
herefore, the
statistical correlations between the two data may have some bias because of the
time
difference. However, common characteristics seem to persist for a very long time
in
organizations, particularly laboratories, as interviewees acknowledged. Hence th
is problem
may not be as serious as other types of time lag.
The third limitation is that questionnaires were made to corporate R&D centers w
hereas
patent data were based on those filed by the whole company. Therefore, we need t
o be careful
in interpreting the results for this reason. Third, the interpretations of the m
eanings of
questionnaire answers had to rely mainly on the information from the managers be
cause of
few empirical studies as this type. Although I used multiple answers and consult
ed multiple
informants to prove each organizational attribute of the four capabilities, ther
e may be bias
from the informants due to the lack of the existing research.
22/22
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TABLE 1
Companies in sample
Country Electronics/Engineering Automotive Pharmaceuticals Chemicals Total
Japan Canon, Epson, Fujitsu,
Fuji-Xerox, Hitachi,
Mitsubishi Electric, NEC, NTT
DoCoMo, OKI, OMRON,
Matsushita Electric Industrial,
Sharp, Sony, Sumitomo Electric
Industries, Toshiba (15)
Honda, Nissan, Toyota (3) Eisai, Fujisawa,
Takeda, Yamanouchi
(4)
Hitachi
Chemicals,
Mitsubishi
Chemicals,
Sumitomo
Chemicals (3)
25
Korea Samsung, LG (2) 2
Germany Bosch, Infineon, Siemens (3) BMW, DaimlerChrysler,
Volkswagen (3)
Bayer,
Boehringer-ingelheim,
Merck, Schering (4)
Bayer, BASF,
Degussa,
Merck (4)
13
Switzerland ABB (1) Roche, Novartis (2) 3
Netherlands Philips (1) 1
Finland Nokia (1) 1
Sweden Ericsson (1) 1
Total 24 6 10 7 47
TABLE 2
Companies in sample
Country Electronics/Engineering Automotive Pharmaceuticals Chemicals Total
Japan Canon, Epson, Fujitsu,
Mitsubishi Electric, NTT
DoCoMo, Matsushita Electric
Industrial, Sharp, Sony,
Sumitomo Electric Industries (9)
Honda, Toyota (2) Eisai, Fujisawa,
Takeda,
Yamanouchi (4)
Hitachi Chemicals,
Mitsubishi
Chemicals,
Sumitomo
Chemicals (3)
18
Germany Bosch, Infineon, Siemens (3) BMW, DaimlerChrysler
(2)
Bayer, Merck,
Schering (3)
Bayer, Degussa,
Merck (3)
11
Switzerland ABB (1) Roche, Novartis (2) 3
Netherlands Philips (1) 1
Total 14 4 9 6 33
26/26
TABLE 3
Means by Region and Industry
Industry
(Number of sample firms)
Turnover
(US$ million)
Sales in US
(US$ million)
Employees RDE (R&D
expenditure)
(US$ million)
RDI
(R&D
intensity)
Asia Electronics & Automobile (16) 37827.3 9504.2 112083.1 2015.9 0.055
Chemicals& Pharmaceuticals (7) 6715.4 1007.9 17137.3 569.5 0.100
Europe Electronics & Automobile (6) 47075.0 10697.2 176318.9 3003.4 0.092
Chemicals& Pharmaceuticals (7) 13453.4 4357.4 56984.4 1374.8 0.115
All 30892.8 7397.6 104347.2 1874.2 0.082
Industry
(Number of sample firms)
USM (%) ACUS USCC USOL USR
(%)
USE
(%)
Japan Electronics & Automobile (16) 19.4 0.028 0.003 0.024 4.6 19.3
Chemicals& Pharmaceuticals (7) 19.1 0.066 0.017 0.041 4.7 5.9
Europe Electronics & Automobile (6) 22.9 0.157 0.017 0.098 9.0 6.8
Chemicals& Pharmaceuticals (7) 31.1 0.779 0.049 0.237 16.1 6.4
All 22.6 0.221 0.018 0.088 8.1 12.6
Sources: company reports (Turnover, sales in US, employees, RDE and RDI) and sur
vey to individual firms (USR
and USE). Turnover, sales in US, employees, RDE and RDI are based on the consoli
dated data as of 2002.
USR: Share of R&D people if a firm in corporate R&D centers in US
USE: Share of expatiates from the home country in corporate R&D centers in US
27/27
Table 4
Parameter estimates capabilities comprising AC (Japan = 1, Europe = 0)
Region (Japan = 1, Europe = 0)
Acquisition capability (ACUS)
-.350*
(.177)
.407
Combinative capability (USCC)
-.021*
(.010)
.381
Independence capability (USOL)
-.123***
(.041)
.510
Utilization capability (USM)
-.013
(.044)
.336
First row is unstandardized coefficient; Second row is standard error;
Third row is R square.
* P< .1;
** P< .05
*** P< .01
28/28
Table 5
Parameter estimates for share of R&D people (Japan = 1, Europe = 0)
Region (Japan = 1, Europe = 0)
Foreign
-1.649***
(.566)
.377
Foreign hired in the last three years
-2.295***
(.599)
.525
Female
0.189
(.304)
.490
New staff without working experience
0.463
(.569)
.070
Foreign degree
-1.647***
(.568)
.410
Postdoctoral experience
-2.380***
(.584)
.588
Doctoral degree
-1.826***
(.547)
.560
First row is unstandardized coefficient; Second row is standard error;
Third row is R square.
* P< .1
** P< .05
*** P< .01
29/29
Table 6
General statistics of the US, Germany and Japan
US Germany Japan
GDP 5563 1967 3885
GDP per capita 31592 32813 44457
Population (1000) 284822 82340 127291
Total employment (1000) 149298 38911 66222
Total researchers 1261227 264384 675898
Source: OECD MSTI
Note: As of 2001
GDP and GDP per capita are constant1995 US$ billion
30/30
Table 7
Share of GDP and Employment by Industry
US Germany Japan
GDP
First industry 1.6 1.1 1.7
Second industry 25.2 31.9 37.1
(Manufacturing) (17.0) (23.6) (24.3)
Third industry 73.9 60.9 63.1
Employment
First industry 2.7 2.9 5.3
Second industry 24.2 34.3 33.0
(Manufacturing) (16.1) (23.7) (22.0)
Third industry 73.1 62.7 61.1
Source: ‘Doitsu Touitsugo no 10 Nen (Germany, 10 years after the Unification)’
(2003)
As of 1997
Table 8
Share of patenting activities at home and in the US using USPTO granted 1989-200
0.
S eCcthoerm icals EU MN6C3s.A4 t0 %h omJeP N 9M8N.4C0s% EU 2M3N.9CI0ns% t heJ PU
NS M1N.3C0s% EPMlhoeatcrotmrr iacvcaeelh u&ict lieeclsae lcst ronics 835962...74
6000%%% 99-49 ..0400%% 23538...517000%%% -04 ..3800%% Source: Criscuolo, 2004
84 European and Japanese MNCs listed in the Fortune 500.
31/31
Table 9
Number of Doctoral Degree Obtained by Field
US Germany Japan
Number of doctoral degree obtained by field
Natural science 9816 5974 1586
Math/com science 1832 956 NA
Agricultural science NA 472 1241
Engineering 5502 2220 3864
Number of doctoral degree obtained by field per 10,000
Natural science 0.344 0.726 0.125
Math/com science 0.064 0.116 NA
Agricultural science NA 0.057 0.098
Engineering 0.193 0.270 0.312
Source: NSF ‘Science and Engineering Indicators 2004’
Note: Japanese data include thesis doctorates
Note: As of 2001
Table 10
Number of Doctoral Degree Obtained in Biology
US Germany Japan
Number of doctoral degree obtained in biology
1990 4328 3054 301
1995 5376 3501 384
2000 5855 2737 560
Number of doctoral degree obtained in biology per 10,000
1990 0.173 0.384 0.025
1995 0.205 0.429 0.031
2000 0.208 0.333 0.044
Source: Japanese and US data from ‘Science Based industries’; German data from
German Ministry of Education and Research
Note: Japanese data include thesis doctorates
32/32
Table 11
Foreign-born US residents with S&E doctorates, by place of birth
Number of
Residents
China 37,900
India 30,100
United Kingdom 13,100
Taiwan 10,900
Canada 8,400
Germany 7,200
Iran 4,800
Former Soviet Union 4,600
Korea 4,500
Philippines 3,400
Poland 3,200
Japan 2,800
Argentina 2,700
Other foreign born 58,400
Source: NSF ‘Science and Engineering Indicators 2004’
Note: Japanese data include thesis doctorates
Note: As of 2001
Table 12
Foreign-born US residents with S&E doctorates by place of birth
Internationally US share of internationally
Coauthored articles Coauthored articles
Year 1994 2001 1994 2001
US 15.8 23.2 NA NA
Germany 30.6 41.7 30.2 29.9
Japan 13.7 19.7 19.7 42.8
Source: NSF Science and Engineering Indicators - 2004 Appendix table 5-44
Note: As of 2001
33/33
Figure 2
Acquisition of
US technology
Combination
Utilization of
US technology
Independence
Figure 1
Independence capability
Acquisition capability Combinative capability
Utilization capability
3.835***
.042
.027
.004
5.927* 1.352*
34/34
U S HOME
0.028 (100%)
Combination
0.003 (10.7%)
Combination
0.001 (3.6%)
OTHER
Autonomy
0.024 (85.7%)
Figure 3 Japanese/Korean Engineering/Electronics/Automobile
Share of patents concerned in all (share of combination and autonomy in ACUS)
Share of patents concerned in all (share of combination and autonomy in ACUS)
Autonomy
0.098 (62.4%)
U S HOME
0.157 (100%)
Combination
0.017 (10.8%)
Combination
0.042 (26.8%)
OTHER
Figure 4 European Engineering/Electronics/Automobile
35/35
Figure 5 Japanese and Korean Pharmaceuticals and Chemicals
U S HOME
0.066 (100%)
Combination
0.017 (25.8%)
Combination
0.008 (12.1%)
OTHER
Autonomy
0.041 (62.1%)
Share of patents concerned in all (share of combination and autonomy in ACUS)
Share of patents concerned in all (share of combination and autonomy in ACUS)
HOME U S
0.779 (100%)
Combination
0.049 (6.3%)
Combination
0.493 (63.3%)
OTHER
Autonomy
0.237 (30.4%)
Figure 6 European Pharmaceuticals and Chemicals
36/36
Figure 7 Foreign Direct Investment in R&D in the US
US
Japan
Germany
Sweden
Switzerland Netherlands
2202
4355
16655
1336
6339
2649
7626
12562
26359 18585
Source: NSF ‘Science and Engineering Indicators - 2004’
Note: Sum of expenditure from 1995 to 2000. Millions of current US$
37/37
APPENDIX 1 Definitions and Measures of Constructs
Key constructs
Definitions
Measures
Acquisition capability
(ACUS)
Capability of a firm to acquire US
knowledge in the US
(Number of patents to which US
people contributed) / (Total number of
patents granted to firm)
combinative capability
(USCC)
Capability of a foreign firm to combine
US knowledge with their home country
knowledge
(Number of patents to which US and
home people together contributed) /
(Total number of patents granted to
firm)
Independence capability
(USOL)
The degree of autonomy of a US
subsidiary to invent in the US
independently from the headquarters
(Number of patents to which only US
people contributed) / (Total number of
patents granted to firm)
Utilization capability
(USM)
US market sales as a fraction of the total
sales of a firm
(US market sales of a firm) / (total
market sales of a firm)
Size of R&D (RDE)
Total R&D expenditure of a firm
Total R&D expenditure (US$)
R&D intensity (RDI)
Ratio of R&D expenditure to sales
(Total R&D expenditure)/(Total sales)
* Patents are those first filed between 1995 and 1999 and granted at WIPO, EPO,
USPTO, or national
patent offices where parent firms are located.
* Patents granted at Japanese Patent Office are reduced by a factor of 4.9.
* Turnover, R&D expenditure, number of people are as of 2002
38/38
APPENDIX 2 Definitions and Measures of Constructs
Source: Stanford University. Own calculation.
Note: As of 2002
Stanford Unviersity: by country (number of students), Autumn 2002
Total (graduate and undergraduate) Undergraduates Graduates
1. China (553) 1. Singapore (57) 1. China (407)
2. Republic of Korea (379) 2. Canada (42) 2. India (319)
3. India (375) 3. India (20) 3. Republic of Korea (316)
4. Canada (294) 4. Republic of Korea (19) 4. Canada (204)
5. Japan (186) 5. China (11) 5. Taiwan (102)
6. Germany (166) 6. Malaysia (9) 6: France (89)
7. Singapore (140) 6. Brazil (9) 7. Japan (84)
8. Taiwan (136) 6. Germany (9) 8. Turkey (83)
8. France (136) 6. UK (9) 9. Singapore (77)
10. Thurley (95) 10. Hong Kong (8) 10. Mexico (56)
11. Mexico (73) 10. Pakistan (8) 11. Germany (48)
12. Israel (66) 10. Philippines (8) 12. Hong Kong (47)
13. Italy (63) 10. Mexico(8) 13. Iran (40)
14. Hong Kong (59) 10. Bulgaria (8) 14. Israel (40)
15. Tailand (47) 15. Japan (7) 15. Tailand (38)
15. UK (38)