Management and organisation of knowledge creation in emerging markets: a perspective from subsidiaries of EU MNEs

Abstract

The aim of this paper is to analyse the performance characteristics of large firms that are at the forefront of globalization of their knowledge creating activities. This we do by making a comparison with firms that are much more concentrated in terms of their knowledge creation. Our analysis is based on around 500 of the world’s largest technologically active companies, with their headquarters in the EU, Japan and the US. These companies account for a large proportion of both corporate R&D spending worldwide and total EPO patenting. In particular we address the following sets of questions: * Are globalized firms larger than those that are non-globalized? x Do globalized firms have higher volumes of innovative activity than nonglobalized firms?. * Do globalized firms have higher innovation intensity than non-globalized firms?. * Do globalized have a higher level of economic performance than nonglobalized firms?. The results for the sample as a whole show that firms that are geographically dispersed in their technology creation are, on average, considerably larger, have a higher volume of innovative activities, and have superior economic performance. However in terms of innovation intensity the difference between the two sets of firms is negligible, i.e. they both devote very similar proportions of their total resources to innovation. The analysis also shows that there are considerable differences across sectors in the degree to which these results hold. In terms of size, while firms from most sectors conform to the aggregate pattern, the more globalized companies in the Aerospace industry are, on average, smaller than the non-globalized firms. With regard to the volume of innovation the anomalies are the Automobiles firms. The pattern for innovation intensity is very different with globalized firms from 5 sectors having a lower average value than those that remain geographically more concentrated. The largest variation is in terms of economic performance, with firms in 6 sectors showing a positive relationship with globalization of technology, 3 showing a negative relationship and for a further 2 the difference is negligible. These results suggest that any analysis of the relationship between performance and global location of technology needs to adopt a sectoral approach. They also suggest the need for a deeper understanding of the costs and benefits of globalization versus concentration within each industrial sector. Some of these issues will be addressed in WP 3.2 where detailed information has been gathered from firms active in ICT, Pharmaceuticals and Automobiles. With regard to future work, the next step would be to improve the quality of financial data for the period since 1990. This will enable us to adopt a more dynamic approach, including the testing of causal relationship between globalization of technology creation and performance.