Why Strategic R&D Is (Still) Homebound in Wireless Telecom

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Di Minin, Alberto
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Globalization is a relevant issue for policymakers and firms alike. Although individuals, firms, and countries have always been connected in various ways throughout history, commentators generally claim that globalization has caused a once-unfathomable new height of connectedness at the dawn of the 21st century. This is typically considered to be the outcome of the combined effects of regulatory, political, and market liberalization combined with technological change, especially in information and communication technologies (ICT). In short, globalization might be defined as "the high and increasing interdependency and interrelatedness among different and geographically dispersed actors" (Archibugi and Iammarino, 2002, p. 99; for a popularized discussion see also Friedman (2005)). The most visible trend of globalization, from the viewpoint of firms, has been foreign direct investment (FDI), in the form of the outsourcing and offshoring of manufacturing. However, the rapid change in the global division of manufacturing has perhaps overshadowed another phenomenon: the internationalization of research and development (R&D) (UNCTAD, 2005). Globalization of R&D means researchers and inventors increasingly tend to be located outside the home country of their companies. Despite this trajectory, Patel and Pravit present the non-globalization argument in a seminal paper (Patel and Pavitt 1991), suggesting that the actual inventive activities of multinational corporations (MNCs) tend to be significantly less globalised than the international distribution of R&D expenditures seems to indicate. Patel and Pavitt (1991) suggest that this may be because country-specific characteristics of national systems of innovation still matter for more strategic R&D activities; they highlight such issues as the importance of physical proximity and tacit knowledge, education, training, and basic research. Indeed, R&D internationalization is still today a much-debated subject. Several studies, which will be reviewed in later sections, have recently documented that a growing share of R&D of MNCs is off shored, but evidence is mixed and the "non-globalization" argument also finds support in other empirical analyses. My focus on the wireless telecommunications industry is particularly interesting and relevant to this debate for three reasons. First, this industry has benefited from trade liberalization, deregulation, and technological change, as governments around the world are developing and upgrading their ICT infrastructures (Zysman and Newman, 2006). Second, the industry has also changed its technological core due to the convergence of data- and telecommunications and the emergence of the Internet, thus providing multiple entry points for firms and inventors, including new geographical locations outside the US and Europe. Third, much of the extant research on the internationalization of R&D tends to treat R&D as a 'black box' where the specificities of different types of R&D are undisclosed. This is partly a consequence of the lack or inaccessibility of detailed data on the different types of R&D and inventive activity at the firm level. Due to the significance of standardization, a system of notification of patents deemed essential to specific standards has been set up. This system provides an interesting analytical lens for identifying R&D and inventive activities that lie closest to the technological core of the industry in a strategic, and perhaps also commercial, sense. I will argue that entering into the discussion of patents and Intellectual Property (IP) is beneficial to an examination of the internationalization of R&D as it allows a closer look at the ways the management of intangibles can influence the exploitation of international R&D investment. This paper contributes to research providing a new interpretation for the homeboundedness of critical industrial R&D, and in general to the literature on appropriability and maturation of R&D off shoring. I was able to discuss the result of my quantitative empirical analysis directly with the managers involved in key decisions relating to the development of some of these technologies. Their viewpoint suggests the presence of what I have defined "Safe R&D nests". I will discuss that such "safeness" derives by a close coordination between scientific and technological research and management of intangible assets.
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