The spread of R&D by MNCs reflects a number of trends in international production and innovation. Among these are the need to strengthen or complement internal technological capabilities, increased complexity of global supply-chains in R&D-intensive sectors, and improved scientific and technological resources across the globe (Moncada-Paternὸ-Castello, Vivarelli, and Voigt 2011; OECD 2008). R&D associated with FDI, the ownership or control of a business (affiliate) in another country, represents another dimension of the international character of knowledge creation and exploitation. Direct investment is defined as ownership or control of 10% or more of the voting securities of a business (affiliate) in another country. This section covers statistics collected by BEA on R&D performed by majority-owned affiliates (those owned more than 50% by their parent companies) of foreign MNCs located in the United States and on R&D performed by U.S. MNCs and their majority-owned foreign affiliates.
Between 2000 and 2010, U.S. R&D performed by members of MNCs grew faster than R&D in the U.S. business sector as a whole. Over this period, R&D performed by all U.S.-located businesses grew at an average annual rate of 1.1% in constant dollars. R&D performed in the United States by affiliates of foreign MNCs grew at an average annual rate of 2.3% in constant dollars. R&D performed in the United States by parents of U.S. MNCs also grew at an average annual rate of 2.3% in constant dollars over the same 2000–10 period.
In 2010, parent companies performed $212.5 billion ($191.5 billion in constant dollars) or 76% of U.S. business R&D—higher than their 68% share in 2000. U.S. affiliates of foreign MNCs performed about 15% of U.S. business R&D in 2010, compared with 11% in 2000. The rest of this section looks at changes in recent years (in current dollars) See appendix tables
Affiliates of foreign MNCs located in the United States (U.S. affiliates) performed $41.3 billion of R&D in 2010, up 2.1% after little change in 2009 and 2008 (appendix table
In 2010, three-fourths of R&D by U.S. affiliates of foreign MNCs was performed by firms owned by parent companies based in five countries: Switzerland (22.0%), the United Kingdom (14.5%), Germany (13.8%), France (12.7%), and Japan (12.4%) (table
Manufacturing U.S. affiliates performed 70% or more of U.S. affiliates R&D since 2006 (appendix table
Parent companies of U.S. MNCs performed $212.5 billion of R&D in the United States, based on preliminary 2010 data from BEA (appendix table
European host countries accounted for 62% of U.S. MOFA R&D in 2010, down from 66% in 2007 (table
On the other hand, the shares of R&D activities by affiliates in other regions are increasing. The region of Asia-Pacific, excluding Japan, accounted for a record 16.3% of U.S. MOFA R&D in 2010. The Middle East and Latin America each accounted for about 5% in 2010, up from 3.0% and 3.4%, respectively, in 2007. Within these emerging regions for U.S.-owned R&D, China, India, Brazil, and Israel accounted for the largest shares.
U.S. MOFA R&D performance in China more than doubled in current dollars from 2005 to 2008, with year-to-year double-digit increases to a record $1.7 billion in 2008. This is consistent with increases in total R&D performed in China in recent years and its emergence as the second-largest R&D-performing country (see section, “International Comparisons of R&D Performance”). Single-digit declines in 2009 and 2010 put R&D performed by U.S. MOFAs in China at $1.5 billion in 2010 (appendix table
Reported R&D activity by U.S. MOFAs tripled in India and more than doubled in Brazil from 2007 to 2010 in current dollars, growing much faster than U.S. MOFA production activity in those countries measured as value added (thus increasing their R&D intensity measured as the ratio to value added). U.S. MOFA R&D expenditures in Brazil and India are now on par with affiliates in China. Among countries with at least $1 billion in R&D performed by U.S. MOFAs in 2010, U.S. MOFAs located in Israel have the largest R&D intensity (table
Three manufacturing industries, chemicals (which includes pharmaceuticals), transportation equipment, and computer and electronic products accounted for 56% of U.S. MOFA R&D in 2010. Overall, affiliates classified in manufacturing accounted for 70%. The largest R&D-performing nonmanufacturing industries were information services and PST services (table
In spite of the relative decline in the share of traditional locations such as Europe as a whole and Japan, they remain the top R&D hosts for U.S. MNCs in major industries, reflecting both strengths of host countries in certain technologies and the large R&D stocks by U.S. MNCs in these locations.
Germany is by far the largest location of U.S. MOFA R&D in transportation equipment ($3.2 billion of $7.6 billion in this industry by U.S. MOFAs globally) and in computers and electronic products manufacturing ($1.0 billion out of $6.0 billion by U.S. MOFAs globally). The United Kingdom is the top location in chemicals manufacturing R&D and in PST services R&D by U.S. MOFAs. Japan is the second-largest host for R&D performed by U.S. MOFAs classified in chemicals manufacturing.
On the other hand, among MOFAs classified in PST services, India has emerged as the second-largest host country for U.S.-owned R&D performance after the United Kingdom ($0.8 billion compared with the United Kingdom’s $1.8 billion), based on available preliminary 2010 country-industry details from BEA (table