Government Strategies to Attract R&d-intensive Fdi

Due to the increased internationalization of business R&D, foreign-controlled multinational enterprises are now seen by most governments as a central actor in national innovation systems and as a catalyst for upgrading in global value chains. As a result, competition among countries to attract the R&D activities of multinational enterprises has increased substantially during the last years. The objective of this paper is to classify the main policy instruments used by governments in their efforts to attract internationally-mobile R&D and to discuss some key implementation challenges. The main conclusion is that an efficient promotion of R&D-intensive FDI requires a closer coordination between innovation policy and inward investment promotion, which are two policy areas that have traditionally operated rather separately. In addition, inward investment agencies targeting R&D-intensive FDI are advised to reconfigure the scope of services they provide by placing more emphasis on “after-care”, since R&D-intensive FDI tends to be evolutionary rather than purely “greenfield”.