Discuss the role of multinationals in the globalisation of innovation Essay - 1

Discuss the role of multinationals in the globalisation of innovation - Essay Example Strategies employed by MNEs in the globalisation of innovation One strategy used by MNEs is foreign direct investment (FDI) where MNEs acquire existing assets abroad or set up new wholly or majority owned investments abroad. Other modalities of spreading innovation by MNEs include trade, licensing, cross-patenting initiatives, and international scientific and technological collaborations. Trade involves the exchange of sophisticated products such as electrical and electronic products, precision instruments, fine chemicals and pharmaceuticals (Narula and Zanfei, 2003, P.7). Exports of such products and especially information and technology products worldwide rose from 8% in 1976 to 23% in 2000. The massive increase in the share of world trade represented by research and development intensive sectors signals an increase in globalisation of innovation (Narula and Guimon, 2009, P.5). There has been a steady growth in international patenting trends characterised by non-resident patenting, which is patent applications of foreign investors in a country, and external patenting, which is patent applications of national investors abroad. ... STPs are more common in the domain of biotechnology, new materials and information technology and oftenly involve Triad nations rather than emerging economies. Developed nations’ firms take up over 90% of STP agreements while the share of STPs involving developing country firms is in the range of 5-6%. 70% of all STPs have had at least one US partner since 1960 (UNCTAD, 2005, P.51). The concentration of STPs in highly industrialised countries together with the involvement of American firms can be attributed to the fact that industrialised countries are the largest investors in R&D (Welfens, 1999, P.342). As a result of government regulation, some MNEs are forced to adopt STPs in place of internal innovation. Such situations include where firms form R&D alliances aiming to enter foreign markets protected by non-tariff barriers such environmental regulation in the chemical industries or safety standards in the automobile industry. STPs are common where partner companies share co mplementary capabilities and the integration creates a greater degree of interaction between the partner’s respective paths of learning and innovation. Cooperation helps firms keep up with technological advancements and assists firms in exploring and exploiting emerging technological opportunities (Chen, 2003, P.397). MNEs engage in considerable intra-firm and inter-firm trade with industrialised countries, and this contributed almost 90% of all outbound FDI in 2001. Most of the firms engaged in FDI are also key players in the generation and diffusion of innovation. Over 30% of the top 100 MNEs are involved in R&D intensive industries such as electronic and electrical equipment,