Internationalization of research and development (R&D) by multinational companies is an important topic in the field of international management. Understanding international R&D is a crucial element in understanding globalization, especially in the age of knowledge and information. The purpose of this dissertation is to examine the strategic motives, location choices, and impact of international. In the second chapter, I take stock of the progress in the literature of international R&D by conducting a textual review of existing studies. I find that past studies analyze international R&D primarily from the knowledge-creation and knowledge-exploitation theoretical perspective. I argue that we can advance our understanding of international R&D activities by examining them from other theoretical perspectives. It is also important to analyze different aspects of international R&D, such as regulatory oversight, and the ethical merits of international R&D. For this reason, in this dissertation, I employ and integrate institutional economics, economic theories of offshoring, and behavioral perspective to examine the strategic motives, location choices, and the impacts of international R&D. I develop a theoretical framework and test the arguments in two essays.
In the third chapter, I examine the strategic motive and location choices of international R&D from the perspective of institutions arbitrage. I propose that the R&D internationalization is also driven by the institutions-arbitraging motives, in which firms seek locations with lax ethical standards to avoid or lower regulatory compliance costs in R&D. The institutions-arbitraging motive encourages firms to seek locations with weak regulatory enforcement to avoid the monitoring of regulatory compliance costs or to avoid potential litigation costs from conducting unethical experiments. I further argue that the likelihood of pharmaceutical firms in selecting locations with lower ethical standards or weaker regulatory enforcement is heterogeneous, depending on the firm’s performance relative to the industry average. I find that underperformed firms are more likely to choose locations with low ethical standards or weaker regulatory enforcement than firms with above-average performance.
In the fourth chapter, I examine the domestic impact of international R&D. Based on cost-saving arguments from economic theories as well as the knowledge-augmenting argument from strategic management literature, I propose that the expansion of foreign R&D is associated with the growth of domestic R&D. However, such a positive association is contingent upon the availability of high- and low-discretion slack resources. I argue that because they can provide flexibility for managers to expand innovative activities, high-discretion slack resources strengthen the positive association between foreign R&D and domestic R&D. On the contrary, the accumulation of low-discretion slack resources constraints the selection of R&D projects.
To test my hypotheses, I take advantage of information from clinical trial projects of American-based pharmaceutical firms. My data cover 18 year period from 2000 to 2017. The empirical analyses largely support my arguments.
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