The literature has highlighted that the propensity of MNEs to co-locate offshore R&D labs with their production plants can vary substantially according to firm and industry characteristics. In this paper, we apply a novel two-stage estimation procedure that allows us to tease out this heterogenous behaviour and investigate the factors that are associated with a higher propensity to co-locate production and R&D activities abroad. Using data on 1,483 greenfield international investments in R&D activities made by 855 firms in 587 cities worldwide, we uncover that the strength of the colocation effect is indeed highly heterogenous across firms. In particular, it is higher among firms with less international experience and geographical dispersion of international activities, as well as with a lower share of intangible assets. These results are consistent with the idea that co-location is a substitute for firms' ability to coordinate complex and dispersed organizational structures, and that firms relying relatively less on codified knowledge can use co-location of offshore R&D and production to facilitate knowledge transfer across activities.

International connectivity is a multidimensional construct that plays a pivotal role in attracting the activities of multinational enterprises (MNEs) by facilitating intra-firm coordination and access to external resources. We conceptualize how the different dimensions of international connectivity determine the location of MNEs' knowledge-intensive activities, with a focus on Research and Development (R&D) laboratories and Headquarter units (HQ). By

This paper investigates the role of geographical and temporary proximity in the location and co-location decisions of new manufacturing activities by foreign multinational enterprises (MNEs). Empirical analysis confirms that foreign MNEs co-locate their new manufacturing plants with their plants already operating in the same activity, while geographical proximity exerts a much weaker role when the latter operate in other manufacturing and services activities. This is especially true in the case of knowledge intensive business services, where temporary proximity is more easily obtainable through the travelling and meeting of professionals. Moreover, a spatial econometric extension of our analysis confirms a geographical decay effect for intra-firm co-location with activities located in contiguous provinces.

The issue of whether firm productivity is affected by agglomeration externalities is a longstanding area of research.However, the appropriate geographical level to better detect the effects of agglomeration economies and at which level these externalities work is still unclear. Using detailed firm-level longitudinal data on 4927 manufacturing firms in the United Kingdom over the period 2008-2016, we investigate the relation between the microgeography of external agglomeration economies and firm productivity. We compare different geographical levels: city-wide and narrowly defined neighborhoods around a firm. Results from a multilevel (mixed-effect) model show that urbanization externalities play a role at a higher level of geographical aggregation, such as the city, whereas localization externalities operate at a finer level, within the city and in a closer neighborhood to the firm. Failing to control for more granular levels of geography results in confounding the two types of externalities. We also provide novel evidence that these externalities vary across firm (such as age, size, and productivity) and location (such as population density) characteristics.

This paper investigates the determinants of the location of MNEs' overseas R&D activities, by focusing on two major drivers. On the one hand, external location factors lead the firm to separate its activities along the value chain and geographically disperse these activities in different locations. On the other hand, the R&D location choice may be driven by the existence of internal (within-firm) linkages that motivate firms to locate their value chain activities in the same location (co-location within-firm). Using data from the fDi Markets database, the study examines 2,580 location decisions of new R&D greenfield investments made by MNEs in 110 global cities worldwide, over the period 2003-2014. Results from Conditional and Mixed Logit econometric models reveal that both external and internal factors matter. Findings confirm the strong role of external agglomeration economies, but also suggest that previous R&D and production activities of the same MNE increase the probability to locate R&D in a given global city.Keywords location of international R&D, empirical methodology JEL Classifications F23, O30, R30 Contacts