Research and Development by Multinational and Domestic Firms in Canada

Abstract

This paper presents both theoretical and empirical support for the proposition that less R & D is done in the branch plants of multinational enterprises in Canada than in either the parent multinationals, or in independent Canadian firms of similar size to the subsidiaries. The theory of internalization predicts that the multinational enterprise will concentrate its initial and ongoing R & D in the parent firm. It does this to protect its knowledge advantage from the risk of dissipation and it uses an internal market to control and monitor the use of its firm specific advantage. The empirical work surveyed, and new studies reported, support this interpretation of its global strategy.

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