"When a US firm increases employment at its foreign affiliates by 10%, employment by that same firm in the US goes up by an average of 4%. Capital expenditures and exports from the US by that firm also increase by about 4%. R&D spending – which is associated not just with overall US employment but with employment in highly skilled and highly paid jobs – increases by 5.4%. "
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"What about a counterfactual scenario? What would happen at home if MNC expansion abroad were limited or made more difficult? It is impossible to know precisely what would happen at home if a US firm engaged in less activity abroad. On the basis of our findings of positive interactions between increases in measures of firm activity at home and firm activity abroad, it appears plausible that increasing foreign-affiliate activity increases the overall productivity of an MNC in a way that leads to higher employment in all locations. In this case, inhibiting overseas expansion would have negative consequences for the US economy. Or it could happen that US exports and greater US employment follow foreign affiliate activity, for example, by providing post-sales services or parts and maintenance. Again, in this case, inhibiting overseas expansion would have negative consequences for the US economy.
Our findings do not mean that certain aspects of overseas expansion never diminish similar aspects of home-country MNC activity. Quite the contrary: the spread of investment and R&D – like trade in general – is likely to reshuffle economic activity within as well as across sectors on both sides of borders. Given the multiple positive and significant relationships between increases in overseas activity and increases in jobs, sales, exports, investment, and R&D at home (summarised in Figure 1), the dispassionate public policy analyst would have to bet that the aggregate result from outward FDI by US firms is strongly positive. Conversely, if overseas operations of US MNCs were restricted or made more difficult, the overall consequences would be less activity at home, not more.
Particularly striking is the novel investigation of outward R&D by US MNCs on the US domestic economy. Public discussion is full of zero-sum apprehension – overseas R&D by US multinationals means that the US is “losing its edge”, that others may 'catch up', that US R&D jobs are “being lost” and “aren’t coming back” (National Science Foundation 2012). But the evidence presented here shows clearly that when a US MNC increases its R&D abroad, it also increases its R&D, capital expenditures, exports, sales, and employment in the US. Indeed, what is notable is the discovery that US firms that do not increase their R&D abroad do not tend to increase it at home, either."
"The statistical analysis of the globalisation of R&D by US MNCs is reinforced by case studies that offer practical examples showing how global R&D expenditures and operations of US MNCs may create complementary capabilities and interdependent competencies, rather than simply displacing one capability or competency from a location in the US to location abroad."
"One example is GE Healthcare’s Magnetic Resonance Imaging Laboratory team operating between the Niskayuna, New York, campus and the Munich, Germany campus. The team jointly operates four whole-body scanners that have created major innovations in magnetic resonance imaging (MRI), allowing exceptional anatomic investigation involving the brain, spine, and musculoskeletal system. The synergy between the two research centers has generated spillovers that flow back to the US. GE’s Munich labs provided the initial insights that led to 32-channel, then 64-channel, then 128-channel imaging. This research is now incorporated into the high-end premium MRI equipment that is designed and built in the US."
"It may seem counterintuitive that the creation of new offshore R&D facilities could increase the amount of R&D carried out in the US, but this is what case studies sometimes show."
" The creation of an R&D campus in Chennai, India has allowed Caterpillar to create a 24-hour R&D cycle on engine propulsion and pollution control. The capital-intensive Caterpillar engine labs in Peoria, Illinois operate two shifts with hundreds of channels of temperature, pressure, and emissions data to map diesel performance and emissions. These streams are sent overnight to Chennai, where the data is analysed and returned to Peoria ready for the US engineers when they come to work the next morning. "
" The chief technology officer of Caterpillar points out that the cost for the engine tests would be much greater if Caterpillar instead had a third shift working in the US, making the company’s overall R&D process less efficient and leaving less room for US engineers to exercise their comparative advantage. "
"Using the growing Indian talent pool affects US operations positively by increasing the through-put and lowering the cost of the asset-intensive US test facilities. Round-the-clock interactions between Caterpillar’s Indian and US test facilities help ensure the company’s international market leadership position, while enabling headquarters to hire more US engineers."
