Knowledge-Related Competitiveness and the Roles of Multinationals' R&D in a Peripheral European Economy: Survey Analysis of Greece

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Abstract and Key Results

* The paper analyses survey evidence on foreign firms' R&D in Greece, in the light of recently derived perceptions of decentralisation of knowledge-related activities in MNEs' strategic programmes.

* We investigate various aspects of MNEs' knowledge-related competitiveness in an intermediate-level economy. We examine the nature, extent and influences of R&D positioning. We also test empirically the relationship between subsidiaries' strategic motivations and the different roles allocated to R&D departments.

* In the main, the results meet expectations for a middle-income peripheral European economy. Original development work is at significant levels. However, adaptation of existing technologies to local conditions is still the primary aim of R&D in MNE subsidiaries in Greece. There are clear signs of integration/interdependence of work in R&D labs with other parts of MNE networks. The survey evidence also confirms that subsidiaries' roles are a decisive factor determining the type of overseas labs.

Key Words

R&D, Multinational Enterprise, Knowledge Transfer, Greece

Introduction and Background

One of the most pervasive and strategically significant developments in MNEs' global expansion in the past 30 years has been the quantitative growth of their dispersed R&D facilities and the increasingly diversified roles played by such laboratories. This has been matched by an equally extensive scholarly investigation of the forms and implications of this aspect of MNE evolution. Yet most of the verification of R&D decentralisation in MNEs has been based on operations in developed and well established industrial economies. Here we seek to extend a methodology used to investigate MNE R&D in the UK (Papanastassiou/Pearce 1999) to assess the case of Greece. This aims to both expand our understanding of R&D strategy in MNEs and to generate an overview of the nature of its participation in a country that is middle-level in terms of industrial development but which has a systemic association (through EU) with more industrialised economies and markets.

Early analysis of the sources of the capability of firms to become MNEs (Vernon 1966) and of their initial organisational structures (notably as horizontally-integrated hierarchies; Caves 1971) saw sources of innovation as entirely centralised and the only international knowledge-related function as being the transfer to overseas use of centrally-generated technology. This meant that pioneering perceptions of MNEs and their strategy saw no systemic role for decentralised R&D. Two factors seem to have provided a basis for the initial implicit rejection of overseas R&D as an issue in understanding the MNE and its strategic bases (Pearce 1999). Firstly, that the only factor that could draw any R&D into a foreign subsidiary would be the need to adapt the MNEs' centrally-derived technological capacities to local conditions (markets and inputs). Secondly, that factors relating to the nature of R&D (notably economies of scale) or to its organisation (the need for good communications and precise coordination; concerns over security where interdependent operations are geographically dispersed) provided an overwhelming 'gravitational' force pulling such activity into a focused centralised facility. (1)

Later work on R&D in MNEs has seen this as growing, quantitatively and qualitatively, as these companies have been perceived as evolving from centralised hierarchies to strategically-networked differentiated heterarchies (Hedlund 1986, 1993, Birkinshaw 1994) or transnationals (Bartlett/Ghoshal 1989). (2) We can generalise the understanding of MNEs' R&D that has emerged through these later studies as providing four implications that differ from the implicit hierarchical scenario. Firstly, that the key demand-side reason for doing R&D in overseas subsidiaries (i. …