Home-country vs. foreign location

Traditional theories suggest that research and innovation are located in the companies home country that pursues competitive frontiers in new product markets while transferring more mature technologies abroad. This is the basic theory developed in the product cycle model of Vernon (1966). It also corresponds to the diffusion of the industrial revolution from England to other countries during nineteenth century. In both cases entry into new geographical markets was motivated by the opportunity to exploit economies of scale and scope based upon technologies pioneered in the home market. (Chandler, 1990). 

To examine the extent to which research in the chemical industry is located abroad, this section compares the location of the applicants of the 10,000 patents in the sample with the location of their inventors. The location of the inventors of the patent is thought as the locus where the innovative activity takes place. The location of the applicant is given by the nationality of the mother company of the firm that applied for the patent. The share of patents attributable to inventors located in the home country of the applicant is 88.4%. Only 11.6% of the total patent sample is invented in a foreign country, and this share does not change over the period 1986-1997. Therefore, chemical 

Region of the EU applicants US applicants JP applicants OTH applicants Total invention 

European companies locate in Europe 86.0% of their research in chemicals. The share of US patents developed in the US is 87.7%. It increases to 96.5% for Japanese companies. When European chemical companies locate R D outside Europe, they develop about half of their patents in the US, and the other half in other countries. The American favourite foreign location is Europe 12% of total American patents in chemicals are invented in Europe (62% of patents applied overseas by US companies in chemicals). Table 5 shows the share of patents invented in the home country and in foreign locations by European, American and Japanese companies in the 5 chemical sectors. 

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