The Internationalization of Innovative Activities: The Case of the Semiconductor Industry

7 Already since the early fifties, however, the flow of FDI has developed largely not only but also to developed countries and the approach has shown clear limits neoclassical interpretation. Also in the last two decades have gained FDI in R&D. Despite the increasing internationalization of business activities, innovations are still concentrated in some geographical regions. FDI in services are biased towards the most developed economies, underlining the soaring importance of non-material and human assets in determining business strategies and international competition (UNCTAD Report 2006, 2007). In the current international environment, characterized by growing technological complexity and market pressures, knowledge is a crucial source of differentiation and competitive advantage. It holds, in particular, for multinational enterprises (MNEs), which take advantage by their ability to transfer and exploit their intangible assets internationally, within their own organizational structure. Interestingly, despite the international dispersion of MNEs‟ production and R&D activities, core technologies are still rooted in the home parent country. Knowledge-related qualities, such as its public and tacit nature, and scale economies in R&D may explain why, of the $179.9 billion in R&D expenditures of U.S. MNEs in 2004, 85 percent was accounted for by U.S. parents and 15 percent by their foreign affiliates. The strategic importance of property rights is another factor that could be add to explain the phenomenon. Only recently, the internationalization of R&D activities has become a topic of interest among economists. The explanation is that R&D has been one of the latest corporate activities to take an international dimension. This has occurred simultaneously to the growth of developing economies and to the increase of a more sophisticated demand in those countries.