New forms of organisation and R&D internationalisation among the world's 100 largest food and beverages multinationals

Abstract

This paper explores the strategic internationalisation of Research and Development (R&D) activities of the world's 100 largest food and beverages (F&B) multinationals (MNEs) in 1996 and 2000 with a sample of nearly 8000 affiliates for each period. We develop a global innovation strategy (GIS) structure where we analyse the R&D internationalisation process of F&B MNEs. We argue that in a fully developed GIS model the sourcing of creative inputs does not come exclusively from a ‘central’ R&D laboratory, but other overseas R&D laboratories or technological affiliates can also undertake genuine knowledge creation activity from capitalising on the scientific heterogeneity fostered in individual host countries as well as distinctive demand conditions. Our results indicate the increasing importance of overseas technological affiliates in the application of a GIS in the leading F&B MNEs, which determine the degree of their technological internationalisation. Two variants of technological affiliates reflect two broad knowledge-related activities, i.e. adaptation and genuine forms of knowledge creation.

Introduction

Innovation and technology are of particular importance to the development agenda of countries (UNCTAD, 2005) and a relevant contributing factor, perhaps the most important, to the creation of competitive advantage for firms (Porter, 1998). Learning processes provide the foundations for establishing technological competencies or organisational capabilities that contribute to the firm's competitive advantage (Cantwell and Kosmopoulou, 2001, Cohen and Levinthal, 1989, Kuemmerle, 1997, Kuemmerle, 1999, Pearce, 1999). Research and Development (R&D) is thus a major determinant of good performance in global corporate competition for Multinational Enterprises (hereafter, MNEs) (Franko, 1989).

Given these developments, the internationalisation of R&D has attracted the interest of both academics and practitioners, as such strategies enable the firm to tap into knowledge externalities in world centres for scientific and technological excellence, and facilitate agreements with institutions which are at the forefront of research.

However, there are still few empirical analyses on MNEs’ new transversal structures. While general aspects of the internationalisation of R&D have now been thoroughly explored, our knowledge of these relatively recent R&D superstructures is still insufficient. There is a need to complement the traditional analyses based on patent data or foreign R&D expenditures with studies of these new forms of R&D organisation in MNEs, in order to understand better the internationalisation of these companies’ innovative activities.

This paper analyses the global organisation of R&D in the leading firms of the food and beverages (F&B) industry, and the motives that lead to these firms concentrating their most relevant innovative resources in new centres, often located abroad. In doing so we analyse a sample of around 8000 affiliates of the world's 100 largest food and beverage multinationals (hereafter, F&B MNEs). We approach the internationalisation process using a typology developed and elaborated in earlier studies (Pearce, 1999, Pearce and Papanastassiou, 1999) and investigate the role of the R&D-oriented subsidiaries of MNEs according to the internal resources of the company and the mandate of the subsidiary.

We thus develop a global innovation strategy (GIS) model where we identify the evolution of technological strategies and the critical role of overseas R&D laboratories or technological affiliates in MNEs, which in turn we apply to F&B MNEs. Therefore, our study contributes to the aim of shedding more light on innovation in the so-called low-tech industries, as proposed by recent analyses (von Tunzelmann and Acha, 2005). Second, the majority of previous studies of these forms of global R&D organisation are case studies of small groups of companies. These analyses, in our view, should be complemented with statistical analyses of large samples of similar companies. Third, although the food and beverages (F&B) sector is classified as a low R&D intensity sector (UNCTAD, 2005), F&B MNEs internationalise their R&D activities, according to patent analyses, more than MNEs in most other sectors (Alfranca et al., 2005, Cantwell and Hodson, 1991). Furthermore, F&B MNEs can be considered as precursor to other MNEs because they are, on average, older and more internationally experienced and more internationalised (Stopford and Dunning, 1983). Their analysis, therefore, could help towards a better understanding of the rationale for the new patterns of R&D internationalisation in other MNEs within a GIS model.

The rest of the paper is organised as follows. The next section provides the theoretical foundations and the literature review; Section 3 presents the data and sample description; while Section 4 discusses our empirical methodology and variables. The empirical results and their interpretation are discussed in Section 5. Finally, Section 6 concludes the paper by offering future research questions.