Attraction and deterrence in the location of foreign-owned R&D activities: the role of positive and negative spillovers

This paper examines how the characteristics of local contexts affect the location of foreign-owned R&D activities, in terms of positive (i.e. attraction) and/or negative (i.e. deterrence) spillovers. It distinguishes between activities that are Competence-Creating (CC) (that create new lines of technology for the MNC group) and Competence-Exploiting (CE) (adapt established lines of technology). The empirical investigation uses patents granted in the USA to the world's largest industrial firms for inventions achieved in their European-located operations, classified by the host region in which the research facility responsible is located, over the period 1969–1995. The results show that positive spillovers stem from a high degree of local interindustry diversity, as well as from the presence of a local variety of other actors in the same industry, at least when they are foreign-owned. In contrast, the presence of domestically-owned dominant firms in the same industry tends to act as a deterrent.