How does external technology sourcing affect internal R&D investments?

Abstract

This thesis examines the relationship between internal R&D and external R&D contracting, as well as internal R&D and R&D collaboration for a comprehensive panel of Norwegian firms. Special emphasis is put on multinational firms with R&D ties with foreign affiliates within their enterprises. The data is drawn from the R&D and innovation surveys, conducted and provided by Statistics Norway. Estimating the effect of external R&D sources on internal R&D, we find that neither foreign R&D contracting nor foreign R&D cooperation within multinational enterprises affect internal R&D significantly. We find a substitutable relationship between these external R&D sources and internal R&D. Other external R&D sources are found to be positively related to internal R&D expenditures, and both complementary and substitutable relationships are found between these external R&D sources and internal R&D. We conclude that the need for absorptive capacity seems to be an underlying driver for the increase in internal R&D due to all forms of external R&D activity. Firms with multinational R&D ties seem to have high levels of internal R&D and absorptive capacity. As multinational R&D ties have substitutable properties with internal R&D, multinational R&D sourcing may lead to a displacement of domestic internal R&D activity.