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Rethinking FDI Promotion: New EU Member States on a bumpy road to Lisbon PhD Project by Sergey Filippov UNU-MERIT (Maastricht, NL) GLOBELICS Academy, Lisbon.

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Presentation on theme: "Rethinking FDI Promotion: New EU Member States on a bumpy road to Lisbon PhD Project by Sergey Filippov UNU-MERIT (Maastricht, NL) GLOBELICS Academy, Lisbon."— Presentation transcript:

1 Rethinking FDI Promotion: New EU Member States on a bumpy road to Lisbon PhD Project by Sergey Filippov UNU-MERIT (Maastricht, NL) GLOBELICS Academy, Lisbon

2 Outline of the Presentation Background Conceptual idea The new EU member states Methodology Conclusions Research in Progress

3 MNCs are the major players in innovation process RankCompanySector R&D ( m), Ford Motor, USAAutomobiles & parts Pfizer, USAPharmaceuticals General Motors, USAAutomobiles & parts DaimlerChrysler, GermanyAutomobiles & parts Microsoft, USASoftware Toyota Motor, JapanAutomobiles & parts Johnson & Johnson, USAPharmaceuticals Siemens, GermanyElectrical comp. & equipment Samsung Electronics, South KoreaElectronic equipment GlaxoSmithKline, UKPharmaceuticals Source: European Commission Monitoring Industrial Research: The 2006 EU Industrial R&D Investment Scoreboard

4 MNC context MNCs are evolving from hierarchical structures towards network-based systems, where subsidiaries have distinct strategic roles and scope. Devolution of power facilitates knowledge and technology spillovers. R&D internationalisation. Manufacturing units gain R&D function. Establishment of stand- alone R&D labs.

5 Host Country Policy Context FDI promotion tends to neglect foreign affiliates already established in a host economy Importance of innovation policy is generally acknowledged, but it is still in infancy and, moreover, foreign affiliates are not explicitly targeted.

6 Multi-Level Policy & MNCs NationalRegional (EU) World FDI PolicyInvestment incentives State Aid rules WTO Innovation Policy IPMsLisbon Agenda Corporate Strategies Affiliates HQ level

7 Research Question How foreign affiliates become innovative? What are the determinants of the innovation dynamics in foreign affiliates? How can host country policy stimulate innovation in affiliates (in general and in new EU member states in particular)?

8 Objective In order to enhance innovation process in the host economy it is crucial to understand characteristics and determinants of innovation dynamics of foreign MNC affiliates

9 Innovativeness of foreign affiliates depends on: position in MNC network characteristics of host country innovation system host country public policy Focus of research

10 Affiliates of Multinational Companies Source: UNCTAD 2005

11 New Member States of the European Union

12 New EU member states Strong presence of MNCs (=FDI stock), especially in medium high tech. Characteristics of host country innovation system: Legacy of socialist S&T Host country public policy: Impact of accession to the EU, two levels of policy- making Birth of national innovation policy (+ Lisbon Agenda) National investment promotion agencies (CzechInvest, PAIZ, ITDH) target higher value added FDI R&D-related FDI is a means to achieve Barcelona Target.

13 Share of foreign affiliates in BERD Sources: UNCTAD 2005

14 Western Europe51 % USA / Canada22 % Central & Eastern Europe6 % India4 % China2 % Other Asian countries3 % Foreign Investors Preferred Areas for R&D Activities (Ernst & Youngs European Attractiveness Survey 2005)

15 Methodology Qualitative analysis Literature review + Conceptual part Desk study: policy documents, searching explicit links between FDI and Innovation (positive approach) Survey: a sample of foreign affiliates in several sectors: life sciences, automotive, electronics Case studies of selected companies Designing a policy framework (normative approach)

16 Expected Results Academic contribution Foreign affiliates in NIS Transition economies on the way to knowledge- based economy Policy side A policy framework on coherency between Innovation policy and FDI promotion

17 Research in Progress Life Sciences in the Czech Republic Pharmaceutical Biotechnology

18 R&D intensity R&D as % sales Capex as % sales Dividends as % sales Operating profit as % sales Pharmaceuticals and Biotechnology Software and Computer Services Technology Hardware Source: UKs 2006 DTI R&D Scoreboard Volume 1

19 Importance of R&D link to PharmaceuticalsSemiconductor technology Telecommunications technology Pre- clinical Clinical research Process techno- logy Product develop- ment HardwareSoftware Lead marketLowVery highLowVery highLowVery high Science / research system Very highHigh LowHighLow ProductionLow HighLowHighLow Source: Reger et al. (1999),

20 Mode of entry / Functions /Policies AcquisitionGreenfield ManufacturingAB Manufacturing + R&D CD R&DEF

21 Obrigado !


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