Abstract
This paper examines the determinants of technology transfer between parent firms and their international affiliates, and of knowledge spillovers from those affiliates to host-country firms. Using a unique data set of foreign multinational enterprise (MNE) affiliates based in Italy, we find that affiliate investment in R&D and investment in capital-embodied technology plays a significant role in determining the nature of intra-firm technology flows. However, the basis for any spillovers arising from MNE affiliates does not originate from codified knowledge associated with R&D, but rather from the productivity of the affiliate.
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Notes
For recent discussions of this literature see Haskel et al. (2007) or Wei and Liu (2006).
For a review of this voluminous literature see Wagner (2007).
Micro-data used in this paper refer to the Official Survey on foreign affiliates in Italy, carried out by the Italian National Statistical Institute (ISTAT) in 2005–2006. Qualitative questions on knowledge transfer were introduced following OECD recommendations to increase the stock of available information on MNE behaviour. Aggregated figures were disseminated by ISTAT in February 2007, while micro-data were made available for research purposes shortly after. The data set used in this paper can be accessed upon request at the ADELE laboratory located in the headquarters of ISTAT in Rome.
The reasons for concentrating this study on manufacturing and HTKIS companies are twofold. First, the focus of the research is on industries with a clear relevance of technology as a driver of the industry: this is clearly beyond the scope of most traditional service industries (dominated by, e.g., retailing and wholesaling), where international intra-firm technological transfer is not a significant feature. Second, some firm-level performance indicators, such as TFP and profitability, could not be calculated with respect to most of the service industries, partly because of data constraints, and also because TFP is not a particularly meaningful indicator for most traditional service sectors.
Scientific and technological knowledge can be embedded in material goods, be formally incorporated in patents, licences or software, or stem from R&D, innovation or project activities. This is distinct from managerial competencies, including new managerial procedures or strategies. Note that the question allows for transfer to/from the Italian affiliate from/to any part of the MNE group, not merely headquarters.
TFP is calculated as the Solow's residual from a Cobb–Douglas production function specification, while profitability is given by gross operating margin (value-added minus wage costs) as a share of turnover.
Estimations for only the manufacturing affiliates in the sample show little difference from those for the full sample in terms of coefficient signs or significance. These estimations are available from the authors on request.
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Accepted by Arjen van Witteloostuijn, Area Editor, 24 June 2009. This paper has been with the authors for two revisions.
Appendix
Appendix
STATISTICAL SURVEY ON FOREIGN AFFILIATES RESIDENT IN ITALY 2003–2004
Section 5: Other Information on Foreign Affiliates
5.1. Are the relationships between the company and the companies resident abroad but belonging to the same international enterprise group (parent company or foreign resident affiliates of the same MNE) significantly characterised by one or more of the following aspects?illustration
5.2. Has the foreign control affected the relationships between the company and the other companies active on the national territory in any of the following ways?illustration
Definitions for Compiling the Questionnaire
Transfers of scientific and technological know-how: they refer to all the exchanges of scientific and technological expertise and know-how between the company and the companies resident abroad but belonging to the same international group. These transfers can be either material (highly technological intermediate or instrumental products) or immaterial (use of patents, licences, software or collaborations in research and innovation activities).
Transfers of managerial, commercial competencies or other type of expertise: they refer to the exchanges of expertise and know-how that are not scientific nor technological between the company and the companies resident abroad but belonging to the same international group. These transfers may determine the adoption of new procedures or standards in the company's general organisation or only in some specific areas of it: commercial, administrative, logistics, etc.
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Driffield, N., Love, J. & Menghinello, S. The multinational enterprise as a source of international knowledge flows: Direct evidence from Italy. J Int Bus Stud 41, 350–359 (2010). https://doi.org/10.1057/jibs.2009.57
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DOI: https://doi.org/10.1057/jibs.2009.57