The role of multinationality and foreign ownership in innovation. An analysis of the Community Innovation Survey 2 for the UK financial services*

The paper starts by highlighting a change of emphasis in the internationalisation literature from the nationality of ownership of the investor to the degree of multinationality of the company. This shift has implications for our understand ing of innovation activities and their diffusion. It is in this context that the research sets out to test the hypothesis that multinationality is a more relevant characteristic than nationality of ownership in the interpretation of the results from the UK Community Innovation Survey (CIS). The study is confined to data from the CIS 2 for financial services, a sector where both innovation and internationalisation have been very significant in the 1990s. Following a discussion of methodology and data sources, the results are presented and analysed in sections four and five. They show that belonging to a group and multinationality are more significant characteristics than the nationality of ownership in a variety of innovation variables in financial services from the UK CIS 2. The innovation variables considered fall within the following elements: innovation propensity; levels of innovation; sources of innovations; innovation-related performance; aims of innovation. It is concluded that a full understanding of innovation activities within the enterprise may need to take account of some characteristics of the company to which the enterprise belongs and in particular its degree of multinationality and its size. It is suggested that: (a) future models explaining innovation from CIS data should allow for the multinationality of the company; and (b) that the CIS provides some information on the companies’ characteristics as well as those of the enterprises and specifically on multinationality and size. JEL classification: F23; G20; O31