Week 2 [Demirbag & Glaiser, 2010]

Question 1

What are five (5) elements to keep in mind when choosing an R&D location?
[Demirbag & Glaiser, 2010]

Answer 1

1. R&D wage cost of a region (if MNE’s home wages are high -> locate to low)
2. Development of knowledge infrastructure (strong, select that region (knowledge spillover))
3. Pool of experts available/human capital (many STEM experts for R&D, select that region)
4. Country risk of offshore location (stable/unstable)
5. Prior R&D (country) experience in a region (“past project went well” -> go there)
   - Decide what is more important to you, depending on context

Question 2

What is the research question of the [Demirbag & Glaiser, 2010] article?
[Demirbag & Glaiser, 2010]

Answer 2

With greater choice and greater uncertainty, how does an MNE choose a location for their R&D?

Question 3

How is the trade-off made between ‘host country experience’ and ‘political risk’, when it comes to choosing an R&D location (2)?
[Demirbag & Glaiser, 2010]

Answer 3

1. If it’s a ‘high political risk’ country, then ‘prior to country experience’ appears to compensate for this.
2. As firms learn how to manage their R&D projects, the impact of ‘country’ and ‘political risk’ diminished
   - E.g. a young company might not have the experience to deal with high political risk
   - In line with internationalization theory