Entry Mode, Organizational Learning and R&D in Foreign Affiliates: Evidence from japanese Firms

This paper develops hypotheses concerning the role of entry mode and experience-based organizational learning as determinants of the r&d intensity of foreign affiliates and tests these hypotheses on a sample of 420 japanese manufacturing affiliates abroad. Entry mode has a major impact on r&d activities: the r&d intensities of acquired affiliates substantially exceed those in wholly owned greenfield affiliates, while the r&d intensities of minority owned ventures are higher if japanese parent firms lack strong r&d capabilities at home. For greenfield operations, support is found for an incremental growth pattern of foreign r&d as a function of organizational learning and affiliate capability building. The results are consistent with the view that part of the explanation for japanese firms' relative lack of involvement in overseas r&d must be sought in their status as ‘latecomers’ in the establishment of overseas manufacturing networks. At the same time, a number of japanese firms have actively used foreign acquisitions and joint ventures to gain access to overseas technology and to establish overseas r&d capabilities at a faster pace.