The Internationalization of Corporate R&D and the Automotive Industry R&D of East‐Central Europe

Abstract

This article examines the development of corporate research and development (R&D) in the automotive industry of East-Central Europe (ECE) in the context of the internationalization of corporate R&D generally and the automotive industry R&D specifically. Driven by large inflows of foreign direct investment since the early 1990s, vehicle assembly and the production of automotive components grew significantly in ECE. In my study I investigated the extent to which these increases in production have also led to the development of automotive R&D as an example of a higher value-added function of the automotive value chain. I conducted a more detailed analysis of Czech automotive R&D because of its prominent position in ECE. Despite modest growth, my analysis uncovered inherent weaknesses of automotive R&D in ECE and strong barriers to its future development related to its peripheral position in the European and global automotive production networks.e cge_1155 279..310 279 ECONOMIC GEOGRAPHY 88(3):279-310.

Neither core nor periphery: The search for competitive advantage in the automotive semi‐periphery

“…For example, Laurens, Bas, Schoen, Villard, and Larédo () conclude that the internationalization of manufacturing R&D is subject to ebbs and flows and that different patterns of R&D internationalization exist among U.S., European, and Asian firms. This point is particularly germane to studies of automotive R&D. In general, there is a propensity for automakers to locate R&D close to their corporate headquarters (Hannigan, Cano‐Kollmann, & Mudambi, ; Pavlínek, ; Van Biesebroeck & Sturgeon, ). However, even among automakers there are differences in the organization of corporate functions, including R&D. For example, some automakers give more responsibility to their leading parts and components suppliers for R&D than others (Klier & Rubenstein, ).…”

Value creation and value capture in the automotive industry: Empirical evidence from Czechia

“…As such, they tend to be more profitable than their subsidiaries and tend to pay higher taxes (Dischinger et al, 2014a(Dischinger et al, , 2014bMudambi, 2008). The headquarters and their geographic vicinity also benefit from high expenditures of gross profits on high value-added functions, such as R&D and corporate support functions, including strategic planning, marketing, management, and administration (Dedrick et al, 2011;Pavlı´nek, 2012). Overall, countries and regions benefit significantly more from hosting TNC headquarters than subsidiaries that have similar firm characteristics (Dischinger et al, 2014a).…”

“…However, strategic functions and autonomy of Tier 2 lead firms are limited because they are foreign owned, which also affects their value capture by profit repatriation. The ultimate strategic functions are missing and conducted abroad by foreign owners, which is Volkswagen in the case of Sˇkoda Auto (Pavlı´nek, 2012; Value creation and value capture in the Czech automotive industry…”

“…This does not mean, however, that external suppliers also capture the same share of the created value in the value chain. Lead firms along with leading component suppliers have been increasingly shifting production to lower cost ''emerging'' economies while maintaining crucial knowledge-intensive and high value-added activities in their home countries (Pavlı´nek, 2012;Sturgeon et al, 2008;Sturgeon and Van Biesebroeck, 2011). Since automotive production networks are no longer predominantly organized at the national scale (Dicken, 2011;Hudson and Schamp, 1995), the international flows of value within the automotive industry have increased rapidly in the form trade, FDI, and profit shifting strategies.…”

SME Roles in Modular Value Chains: Perspectives for Growth and Innovativeness

“…The lead company provides a technology and specifies the standards of production and supplies, which stimulates process innovations. Such a relationship implies the threat of idiosyncratic investment and locking the subcontractor in the standardised, lower value-adding activity in global value chains (Rugraf, 2010;Pavlínek, 2012;Gancarczyk, 2015;Gancarczyk & Gancarczyk, 2013). Due to asset specificity, power relations are uneven, leaving the supplier at a disadvantaged position.…”