International battle of giants; the role of investment in research and fixed assets
First, at the company level, R&D-intensive giants on the Fortune Global 500 list respond strongly to their rivals' investments in R&D. In the electronics and computer industries, the corporations race in a sequence related to the product chain. Chemical giants, in contrast, respond mainly simultaneously to each other’s R&D expenditures. Next to the R&D response, also past profits and the debt/assets ratio contribute to the explanation of R&D investments. For fixed assets, the giants respond less frequently to each other; instead, the past financial performance has a significant impact.
Second, the paper investigates the international allocation of investments. Determinants are national comparative advantages, regional specific knowhow, costs of international transport, the fixed costs of production facilities in host countries, and the future size of foreign markets. The reasoning is applied to the Netherlands, which plays host to many plants of foreign oil- and chemical corporations and European distribution centers of electronic and computer giants.
R&D leads to new products. A higher rate of growth of the number of new products and less substitutability between product varieties stimulate the rate of economic growth. The ongoing shift in emphasis from Research to Development may, however, hurt future economic growth, because it renders inventions less radical.
Each topic addressed concludes with consequences for policy makers. In addition, the report presents the Dutch R&D scoreboard; showing how managers can best use their R&D budgets, it discusses policy dilemmas linked to creativity, and it asks for the role of industrial design. All topics are illustrated with ample practical evidence.