This section covers statistics on R&D performed by majority-owned affiliates of foreign multinational corporations (MNCs) located in the United States, and R&D performed by U.S. MNCs and their majority-owned foreign affiliates, collected by the Bureau of Economic Analysis (BEA). See sidebar, "Foreign Direct Investment in R&D."
R&D arising from foreign direct investment (FDI) activities is quantitatively important since MNCs are the largest performers of business R&D in the United States (discussed below) and in other economies (Dunning and Lundan 2009). Both home country and international opportunities and policies affect R&D and other innovation-related activities by MNCs (Breznitz 2009; Athukorala and Kohpaiboon 2010). In turn, MNC activities influence the ultimate impacts of national and international R&D on national economic growth and productivity.
The majority of R&D by U.S. MNCs continues to be performed in the United States. Outside the United States, R&D by U.S.-owned foreign affiliates is performed mostly in Western Europe, Canada, and Japan, followed more recently by other locations in the Asia-Pacific region. Information on character of work for MNCs' R&D is presented in the sidebar, "Linking MNC Data from International Investment and Business R&D Surveys."
Majority-owned affiliates of foreign MNCs located in the United States (U.S. affiliates) performed $40.5 billion of R&D or 13.9% of the $290.7 in U.S. business R&D performed in 2008 (preliminary BEA estimate). Since 1999, the share of these companies in U.S.-located business R&D, as collected in NSF R&D surveys, has fluctuated narrowly between 13% and 15%. About 90% of R&D by U.S. affiliates of foreign MNCs is performed by firms owned by European, Japanese, and Canadian parent companies (appendix table
The share of U.S. affiliates' R&D performed by manufacturing companies has decreased from over 80% in the late 1990s to 74.7% in 2007 and 69.6% in 2008. Country ownership patterns and industry focus have remained relatively unchanged, with Swiss- and British-owned companies, for example, performing close to two-thirds of R&D by U.S. affiliates classified in chemicals (which includes pharmaceuticals) and German-owned companies performing close to one-quarter of R&D by U.S. affiliates classified in transportation equipment in 2008 (table
In 2008, parent companies of U.S. MNCs performed $199.1 billion of the $290.7 billion of R&D performed by businesses in the United States. Their majority-owned foreign affiliates performed $37.0 billion according to preliminary BEA data (see table
R&D by foreign affiliates of U.S. MNCs has gradually shifted from traditional host countries, including Japan, towards other Asian venues. The combined share of Europe, Canada, and Japan as hosts of R&D by U.S.-owned foreign affiliates declined from about 90% in the mid- and late 1990s to around 80% since 2006. European-located affiliates have performed about two-thirds of R&D by affiliates of U.S. MNCs since 2003, after declining in the late 1990s and early 2000s (figure
On the other hand, the share of R&D performed by Asia-located affiliates (other than in Japan) increased from about 5% to 14% from 1997 to 2008. In particular, the share of U.S.-owned affiliates' R&D performed in China, South Korea, Singapore, and India rose from a half percentage point or less in 1997 to 4% for China, just under 3% for South Korea, and just under 2% each for Singapore and India in 2008.
Manufacturing affiliates accounted for 80% of foreign affiliates' R&D in 2008, including two-thirds performed in three industries: transportation equipment (25%), chemicals (including pharmaceuticals) (24%), and computer and electronic products (17%) (table
The country and industry distribution of U.S. MNCs' foreign R&D is related, among other factors, to historical S&T strengths in the host countries. United Kingdom and Germany, for example, hosted 20.4% and 12.0% of U.S.-owned overseas R&D in chemicals (which includes pharmaceuticals), whereas affiliates located in Germany performed almost two-fifths of R&D by transportation equipment affiliates (table
Within the professional, technical, and scientific services industry, affiliates located in the UK performed 22.3% of foreign affiliates' R&D total, followed by Canada (12.5%) and India (6.3%), according to available country detail. Lastly, about four-fifths of affiliates' R&D in information services (which includes software and Internet publishing and telecommunications) in 2008 was performed in three areas: Ireland (30.7%), Canada (22.3%), and Asia outside Japan (25.5%).