{'fraction_non_alphanumeric': 0.017061611374407582, 'fraction_numerical': 0.0014218009478672985, 'mean_word_length': 5.264094955489615, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Competitive Paper Submission 28th Eiba Conference Technology, Clustering and Foreign Investment Sarianna M. Lundan

In this paper we will explore the consequences of the internationalization of corporate research and development (R&D) on the locational patterns of innovative activity, and the role foreign investment plays in the financing of such activity. We know that although the number of research-intensive small firms continues to grow, both in terms of output as measured by patent citations as well as input as measured by R & D expenditures, large firms claim the lion's share of innovative activity in many sectors, although sectoral differences are substantial. Additionally, the share of government funded research has continuously declined in the aftermath of the cold war, while corporate investment in research and development has become by far the most important source of research financing within the G-8 countries, with the exception of Italy. At the same time, the key aspect of the transformation of the multinational firm over the past decade has been the changing of focus away from the exploitation of home-based capabilities towards the establishment of corporate networks aimed not only at the diffusion, but also at the exploitation of disparate knowledge-based resources. Thus multinationals have a unique capability of combining both sources of funding and sources of innovation into the successful commercial introduction of new innovations. We argue, that the source of the available cash flow in the case of the largest multinationals is at least partly attributable to market power and market domination, as only firms that can rely on a brand name, superior distribution, and in final consumer markets, extensive advertising, can generate the required cash to run a successful R & D program. In the final part of this paper, we will present some aggregate evidence on the patters of innovative activity within Europe, paying particular attention to the role of retained earnings in the financing of American direct investment in European research and development activities.