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The New Global Invention Machine: A Look Inside the R&D Networks of U.S. Multinationals
Lee Branstetter, Carnegie Mellon University and NBER Britta Glennon, University of Pennsylvania Brad Jensen, Georgetown University and NBER
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The New Global Invention Machine: A Look Inside the R&D Networks - - PowerPoint PPT Presentation
The New Global Invention Machine: A Look Inside the R&D Networks - - PowerPoint PPT Presentation
The New Global Invention Machine: A Look Inside the R&D Networks of U.S. Multinationals Lee Branstetter, Carnegie Mellon University and NBER Britta Glennon, University of Pennsylvania Brad Jensen, Georgetown University and NBER 1 Since
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…with particularly striking increases in information and in professional, scientific, and technical services
500 1000 1500 2000 2500 3000 3500 4000
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
R&D Expenditures by US MNC Foreign Affiliates by Industry of Foreign Affiliate, Indexed (1999=100)
Information Professional, scientific, and technical services Wholesale trade Manufacturing Other industries
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MNC foreign R&D used to be concentrated in a few advanced economies, but its geographic distribution has dramatically expanded
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MNC foreign R&D used to be concentrated in a few advanced economies, but its geographic distribution has dramatically expanded
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Increased demand for software/IT- related human capital that was not fully met
One driver is the growing importance of software and IT hardware in innovation
IT- and software-biased shift in innovation US MNCs do R&D abroad in “new hubs” that have large quantities of STEM workers
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IT and software have become much more important in US innovation
.1 .2 .3 .4 .5 .6 1980 1990 2000 2010 2020 Application Year
Growth in the Proportion of USPTO Patents that are Software or IT Hardware
Source: USPTO
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IT and software have become much more important in US innovation
IT and software are also domains where geographic disaggregation is easier
.1 .2 .3 .4 .5 .6 1980 1990 2000 2010 2020 Application Year
Growth in the Proportion of USPTO Patents that are Software or IT Hardware
Source: USPTO
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Demand for talent in these domains was partly addressed with imports of foreign talent…
68% 114% 185% 330%
0% 50% 100% 150% 200% 250% 300% 350%
Growth in US college-educated workforce, 1993-2010
All workers IT Workers Foreign Workers Foreign IT Workers
Source: National Survey of College Graduates (NSCG) -1993, 2003 and 2010
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…and partly addressed by accessing foreign talent abroad – especially when immigration restrictions were more constraining
Source: Glennon (2019)
In 2004, the H-1B cap fell by ~75%
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Specialization according to comparative advantage?
12.81% 67.23% 18.49%
China Germany India Israel
Comp & Elect Prod Manuf Electrical Equip Manuf Finance & Insurance Information Mining Other industries Prof, Sci & Tech Svc Retail Trade Traditional Manuf Wholesale Trade Note: Traditional Manufacturing includes Chemical, Food, Machinery, Primary & Fabricated Metals, Transportation Equipment Source: BEA
R&D Performed by Affiliates in 2009, by Industry of Affiliate
Source: Bureau of Economic Analysis
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Could R&D globalization be a way to reverse the global productivity slowdown?
Source: Byrne, Fernald, and Reinsdorf, 2016
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Could R&D globalization be a way to reverse the global productivity slowdown?
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The “burden of knowledge” concept implies that the scale of investment in innovation matters
Source: Jones (2009)
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Could R&D globalization be a way to reverse the global productivity slowdown?
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The “burden of knowledge” concept implies that the scale of investment in innovation matters
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Many of the “new” R&D hubs appear to have higher-than- typical R&D productivity within MNC networks
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Takeaways
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US MNCs have developed an innovation system that spans the globe
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The need for IT/software human capital has driven some of the surge in and location choice of foreign R&D
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Evidence suggestive of a global division of labor, where activities are located in regions where production is most efficient
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Foreign talent could power an acceleration in the rate of productivity growth
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Deglobalization could inhibit the productivity benefits that R&D globalization could bring
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THANK YOU
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BACKUP SLIDES
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R&D has always been much more highly concentrated in the home country than other activities of the firm
0% 5% 10% 15% 20% 25% 30%
R&D Employees Sales
Foreign Affiliate Activity as a Share of US MNC Global Activity in 1999
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The US parent continues to be the core of US MNC innovative activity, but foreign activity is steadily becoming more important
.82 .84 .86 .88 .9 .92 1990 1995 2000 2005 2010 2015 Year
Source: Bureau of Economic Analysis
US MNC's R&D Expenditure at Home as a Share of Total Global R&D Expenditure
.78 .8 .82 .84 .86 2000 2005 2010 2015 Application Year
Source: Bureau of Economic Analysis & USPTO Note: Foreign patents defined by having at least one foreign inventor on the patent
US MNC's Patenting at Home as a Share of Total Global US MNC Patents