Transcript Rethinking FDI Promotion: New EU Member States PhD Project by

Rethinking FDI Promotion:
New EU Member States
on a bumpy road to Lisbon
PhD Project by
Sergey Filippov
UNU-MERIT (Maastricht, NL)
GLOBELICS Academy, Lisbon
Outline of the Presentation
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Background
Conceptual idea
The new EU member states
Methodology
Conclusions
• Research in Progress
MNCs are the major players in
innovation process
Rank
Company
Sector
R&D (€ m),
2005
1
Ford Motor, USA
Automobiles & parts
6 781.92
2
Pfizer, USA
Pharmaceuticals
6 308.88
3
General Motors, USA
Automobiles & parts
5 679.86
4
DaimlerChrysler, Germany
Automobiles & parts
5 649.00
5
Microsoft, USA
Software
5 581.52
6
Toyota Motor, Japan
Automobiles & parts
5 423.93
7
Johnson & Johnson, USA
Pharmaceuticals
5 350.94
8
Siemens, Germany
Electrical comp. & equipment
5 155.00
9
Samsung Electronics, South Korea
Electronic equipment
4 612.61
10
GlaxoSmithKline, UK
Pharmaceuticals
4 564.13
Source: European Commission. 2007. Monitoring Industrial Research: The 2006 EU Industrial R&D Investment Scoreboard
MNC context
• MNCs are evolving from hierarchical structures
towards network-based systems, where
subsidiaries have distinct strategic roles and
scope.
• “Devolution of power” facilitates knowledge and
technology spillovers.
• R&D internationalisation. Manufacturing units
gain R&D function. Establishment of standalone R&D labs.
Host Country Policy Context
• FDI promotion tends to neglect foreign affiliates
already established in a host economy
• Importance of innovation policy is generally
acknowledged, but it is still in infancy and,
moreover, foreign affiliates are not explicitly
targeted.
Multi-Level Policy & MNCs
National
Regional
(EU)
World
FDI Policy
Investment State Aid
incentives rules
WTO
Innovation
Policy
IPMs
Corporate
Strategies
Affiliates
Lisbon
Agenda
HQ level
Research Question
• How foreign affiliates become innovative? What
are the determinants of the innovation dynamics
in foreign affiliates?
• How can host country policy stimulate
innovation in affiliates (in general and in new
EU member states in particular)?
Objective
• In order to enhance innovation process in the
host economy it is crucial to understand
characteristics and determinants of innovation
dynamics of foreign MNC affiliates
• Innovativeness of foreign affiliates depends on:
▫ position in MNC network
▫ characteristics of host country innovation system
▫ host country public policy
Focus of research
Affiliates of Multinational Companies
Source: UNCTAD 2005
New Member
States of the
European Union
New EU member states
• Strong presence of MNCs (=FDI stock), especially in
medium high tech.
Characteristics of host country innovation system:
• Legacy of socialist S&T
Host country public policy:
• Impact of accession to the EU, two levels of policymaking
• Birth of national innovation policy (+ Lisbon Agenda)
• National investment promotion agencies (CzechInvest,
PAIZ, ITDH) target higher value added FDI
• R&D-related FDI is a means to achieve Barcelona Target.
Share of foreign affiliates in BERD
80
72.1
70
62.5
60
50
46.6
45.3
45
40
30
24.7
23.7
22.1
19.1
20
19.0
14.1
10
3.4
3.4
IN
JP
0
IE
HU
CZ
SE
UK
NL
CN
DE
PL
SK
US
Sources: UNCTAD 2005
Foreign Investors’ Preferred Areas for R&D Activities
(Ernst & Young’s European Attractiveness Survey 2005)
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Western Europe
USA / Canada
Central & Eastern Europe
India
China
Other Asian countries
51 %
22 %
6%
4%
2%
3%
Methodology
• Qualitative analysis
• Literature review + Conceptual part
• Desk study: policy documents, searching explicit
links between FDI and Innovation (positive
approach)
• Survey: a sample of foreign affiliates in several
sectors: life sciences, automotive, electronics
• Case studies of selected companies
• Designing a policy framework (normative
approach)
Expected Results
• Academic contribution
▫ Foreign affiliates in NIS
▫ Transition economies on the way to knowledgebased economy
• Policy side
▫ A policy framework on coherency between
Innovation policy and FDI promotion
Research in Progress
• Life Sciences in the Czech Republic
▫ Pharmaceutical
▫ Biotechnology
R&D intensity
R&D as %
sales
Capex as % Dividends
sales
as % sales
Operating
profit as %
sales
Pharmaceuticals and
Biotechnology
Software and Computer Services
14.9
4.9
6.4
20.2
10.4
3.9
2.3
19.6
Technology Hardware
8.2
5.6
1.2
8.4
Source: UK’s 2006 DTI R&D Scoreboard Volume 1
Importance of
R&D link to
Pharmaceuticals
Semiconductor
technology
Telecommunications
technology
Preclinical
Clinical
research
Process
technology
Product
development
Hardware
Software
Lead market
Low
Very high
Low
Very high
Low
Very high
Science /
research system
Very high
High
High
Low
High
Low
Production
Low
Low
High
Low
High
Low
Source: Reger et al. (1999),
Mode of entry / Functions /Policies
Acquisition
Greenfield
Manufacturing
A
B
Manufacturing
+ R&D
R&D
C
D
E
F
Obrigado !