Global knowledge spillovers between market rivals: cross-border internal linkage strategies in R&D, multi-location technology competition, and heterogeneity in IPR policies

An important risk for multinational enterprises (MNEs) performing R&D at a global level is unintended technology diffusion to other firms (knowledge spillovers). One way a MNE can aim to reduce the risk that its knowledge and technologies are misappropriated by others is to adopt an R&D strategy focusing on control through internal linkages across dispersed R&D units. This project addresses three related and important issues. First, it examines the potentially varying effectiveness of internal linkage strategies in heterogeneous host country environments, in particular in terms of the strength of IPR (intellectual property rights) protection (patents and trade secrets). Second, since large MNEs with R&D units in several countries may be collocated with other globally operating rivals in multiple locations simultaneously, the project examines whether and under what circumstances this renders the knowledge protection effects of internal linkage strategies ineffective. Third, the performance effects of R&D dispersion and collocation do not only depend on restricting outgoing spillovers but also on the effectiveness of local knowledge sourcing. The project explores how MNEs may reconcile these two objectives. Hypotheses will be developed and tested on comprehensive data on the global biopharmaceutical industry. Patterns are expect to depend on the asymmetry between rival firms in terms of technology leadership and the strength of technology and market competition between firms.