Publications
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PDF The 2015 Survey on R&D Investment Business Trends
This tenth survey on industrial R&D investment trends is based on 162 responses of mainly large firms from a subsample… Show more of the 1000 EU-based companies in the 2014 EU Industrial R&D Investment Scoreboard. These 162 companies are responsible for €60 billion R&D investment, constituting around 36% of the total R&D investment by the 1000 EU Scoreboard companies. The main findings are as follows: The responding companies expect to increase their nominal R&D investment by 3.0% per year during 2015–17. This is a third less than the expected increases of last year's survey (4.2%) and slightly higher than the results of the one the year before (2.6%). Activities related to Key Enabling Technologies (KETs) are concentrated in environmental and social KETs. Patents filed as reported by the respondent firms are fairly distributed among the different kind of technologies surveyed. The 149 companies which provided information make one-fourth of their R&D outside the EU. Examining the distribution of the expected 3.0% R&D increases by world region, expectations for the EU are slightly lower than the average (2.6% per year over the next three years). Much higher growth is expected in the non-EU world regions: India (15.8%); China (6.9%); the United States and Canada (5.8%); and the rest of the world (3.8%). Expectations for Japan and other European countries have become slightly negative (-0.8% and -1.3%, respectively) and apply to rather small R&D investment amounts. The responding companies' expectations for R&D investment for the next three years show the ongoing participation of European companies in the global economy. While maintaining the focus of their R&D investment in the EU, they reap opportunities for growth in emerging economies. Two out of three of the responding EU-based companies consider their home country the most attractive location for R&D. The United States, Germany, China and India are the most attractive locations mentioned outside the home country. Knowledge-sharing and collaboration (with universities and public research organisations), proximity (to other company sites and technology poles & incubators) and R&D personnel in the labour market (quality, quantity and labour costs) are the criteria that make countries attractive for R&D activity. Quality and quantity of R&D personnel in the labour market clearly rank ahead of labour costs, which are seen as a neutral factor. In a separate comparison of attractiveness factors among R&D sites within the EU, quality of R&D personnel, knowledge-sharing opportunities with universities and public organisations and proximity to other company sites are by far the most frequently stated in the top three. Comparing R&D attractiveness factors within the EU with those for the United States for 33 actual cases, the respondents point to proximity factors, knowledge-sharing opportunities and quality and quantity of R&D personnel as the leading factors for both world regions. Comparing R&D attractiveness factors within the EU with those for China and India, the 11 respondents reveal significant differences between the two world areas. Concerning EU initiatives for structural reforms to boost industrial R&D activity, the highest potential was deemed for making it lighter, simpler and less costly to comply with EU and national laws. This is followed by the improvement of framework conditions and reducing tax complexity. Show less
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PDF R&D profitability: the role of risk and Knightian uncertainty
This paper provides the first empirical attempt of linking firms' profits and investment in R&D revisiting Knight's (1921) distinction between… Show more uncertainty and risk. Along with the risky profit-maximizing scenario, identifying a second, off-setting, unpredictable bias that leads to heterogeneous returns to R&D investments is crucial to fully understand the drivers of corporate profits. Show less
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PDF Determinants of R&D offshoring
We analyse determinants of an enterprise's decision to offshore R&D activities using a novel data set for enterprises in Ireland… Show more over the period 2001-2006. Our results suggest that, on average, other things equal, enterprises integrated in international production and innovation networks, and enterprises which used information and communication technologies (ICT) more intensively were more likely to offshore R&D. Furthermore, characteristics of the import source region had an important influence on enterprise offshoring behaviour, with offshoring to regions outside of the advanced European Union's economies being less likely. Show less
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PDF Macro-economic Models for R&D and Innovation Policies
This report compares R&D modelling approaches in four macroeconomic models used by the European Commission for ex-ante policy impact assessment:… Show more one Dynamic Stochastic General Equilibrium (DSGE) model - QUEST; one Spatial Computable General Equilibrium (SCGE) model - RHOMOLO; one Computable General Equilibrium (CGE) model - GEM-E3; and one macro-economic model - NEMESIS. The report critically compares particularly those parts of the four models that are relevant to R&D transmission mechanisms and interfaces for implementing policy shocks. Given than R&D investment decisions are inherently dynamic, QUEST appears to be the most suitable model for assessing the impact of R&D and innovation policies over time, as it is the only model with inter-temporal optimisation of economic agents. In order to addess questions related to geographic concentration of innovative activities and spatial knowledge spillovers, RHOMOLO has a comparative advantage, as it is the only one which models regional economies and spatial interactions between them explicitly. Due to its detailed treatment of energy sectors and environmental issues, GEM-E3 appears to be the most suitable model for assessing the impact of innovation in clean energy. For a more detailed modelling of different types of innovation measures, NEMESIS can provide valuable insights thanks to its richness in estimating and accounting for specific channels of innovation. We also identify avenues for future research, which in our view could improve the modelling of R&D and innovation policites both from a conceptual and empirical perspective. Show less
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PDF Multinationality, R&D and Productivity Evidence from the top R&D investors worldwide
The paper investigates the impact that the multinational scope of firms' activities can have on their productivity. First, we argue… Show more that such an impact is both direct and indirect, and that the latter is channelled through higher incentives to invest in R&D. Second, we posit that the composition of these direct and indirect effects is different if multinationality is measured at the intensive margin (higher share of multinational on total activities) rather than at the extensive margin (greater geographical dispersion of multinational activities). Using a large sample of top R&D investors in the world, we propose an econometric model based on an R&D and a productivity equation, which are both allowed to depend on multinationality. With this model we can disentangle the direct and indirect effects of multinationality on productivity appropriately. We find i) a positive direct impact of multinational intensity on productivity, while the geographical dispersion of multinationality is negatively correlated with productivity; ii) multinationality (along both dimensions) has a positive indirect impact through higher investments in R&D; iii) this positive indirect effect is however not large enough to compensate the negative direct one at the extensive margin. Results are largely consistent with a theoretical approach that combines transaction cost theory with an economic analysis of how incentives to invest in R&D depend on multinationality. Show less
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PDF Patent Boxes Design, Patents Location and Local R&D
Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the… Show more period 2000-2011 for the top 2,000 corporate research and development (R&D) investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corporate income taxation from the tax advantage of patent boxes. We also exploit a new and original dataset on patent box features such as the conditionality on performing research in the country, and their scope. We find that patent boxes have a considerable effect on attracting patents, mostly because of their favourable tax treatment, especially for high-quality patents. Patent boxes with a large scope in terms of tax base definition also have stronger effects on the location of patents. The size of the tax advantage offered through patent box regimes is found to deter local innovative activities, whereas R&D development conditions tend to attenuate this adverse effect. Our simulations show that, on average, countries imposing such development conditions tend to grant a tax advantage that is slightly greater than optimal from a local R&D impact perspective. Show less
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PDF Top R&D investors and international knowledge seeking: the role of emerging technologies and technological proximity
This paper sheds new lights on the internationalization of technological activities of the top corporate R&D investors worldwide. In particular,… Show more we provide evidence on the technological factors determining their international R&D location strategies. The empirical analysis is based on the patenting activities of the top R&D investors, as reported by the EU Industrial R&D Investment Scoreboard, at the USPTO over the period 2010-2012. The technological proximity to the host country in which these companies seek for new knowledge is a key determinant for their R&D location decision. However, technological proximity has a non-linear effect on the companies' location strategies as they search for new technologies not too close to their knowledge base. Furthermore, top R&D investors worldwide target countries with comparative advantages in emerging technologies. Countries willing to attract high-value investments should create an environment conducive to the creation and development of brand new ideas with a high potential impact on the long term growth. Show less
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Profits, R&D and Labour
A basis assumption in the economic literature is the one of diminishing marginal returns to labour. However, theoretical studies on… Show more knowledge and labour specialization assume that an increase in the knowledge investment embodied in the human capital of workers raises the marginal product of labour. In this paper, we propose a structural approach to test the hypothesis of non-diminishing returns to labour for a panel data set of R&D investing companies, and we explore how the marginal returns to labour vary with their level of knowledge capital (R&D) intensity. Our econometric analysis provides a number of results. First, we find that more knowledge intensive firms have non-diminishing returns to labour, while less knowledge intensive companies exhibit diminishing returns. Second, independently from the knowledge capital intensity, returns to labour increase with size. Relatively smaller firms have diminishing returns, while larger companies have non-diminishing to increasing returns to labour. However, we show that more knowledge intensive firms can attain the threshold of non-diminishing returns faster than their conterparts. Show less
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The impact of skill endowments and collective bargaining on knowledge-intensive greenfield FDI
This paper assesses the contribution of skilled employment and labour market conditions to the ability of attracting knowledge intensive and… Show more manufacturing greenfield FDI. We carry out our analysis by controlling for a wide range of labour market features, such as the collective bargaining coverage rate, the non-wage labour costs, and the occupational skills of employment. It departs from the existing literature in two respects. First, it deepens the analysis on the effect of labour market regulations and skill endowments on greenfield FDI inflows. Second, it investigates the extent to which labour market characteristics matter for discriminating among 'resource-seeking' and 'efficiency/strategic asset-seeking' greenfield FDI activities (e.g. manufacturing versus knowledge-intensive foreign investments, respectively). Our empirical analysis suggests that the quality of employment and the technological knowledge base have different impact on the location of knowledge-intensive and on low-cost labour-intensive manufacturing foreign investments. Further, associating the collective bargaining coverage of unions with the level of regulation in the labour market, our results can provide insights into the effectiveness of labour market policies that aim at attracting knowledge-intensive investments. Show less
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PDF The 2015 EU Industrial R&D Investment Scoreboard
The 2015 EU R&D Scoreboard (the Scoreboard) reports economic and financial information on the world's top 2500 companies that invested… Show more €607.2 billion in R&D over the last fiscal year (2014). It comprises 608 companies based in the EU, 829 companies based in the US, 360 in Japan and 703 from the rest of the world. Show less