Innovac Tecnol Gdes Empresas

John CantwellSimona Iammarino

The technological innovation of multinational corporations in theFrench regionsIn: Revue d'conomie industrielle. Vol. 109. 1er trimestre 2005. pp. 9-28.

AbstractIn a rapidly globalising economy, and particularly in the face of a process of economic integration such as that occurring in theEU, regions forge an increasing number of linkages with other locations within and across national boundaries through the localtechnological development efforts of multinational corporations (MNCs). By using patents granted to the largest industrial firms -arranged by the region (NUTS 1) host to the research facility responsible - the paper explores the location of innovative activitiesof MNCs in France, and the relationship between the profiles of technological specialisation of foreign-owned and indigenouscompanies in the French regions.

RsumDans le processus de globalisation de nos conomies, et particulirement face au processus d'intgration conomique l'uvreen Europe, les rgions mettent en place de plus en plus de liens avec d'autres lieux dans et en dehors des frontires nationales travers les efforts de dveloppement technologique des entreprises multinationales. En utilisant les brevets des grandesentreprises industrielles - apprhendes par la rgion (NUTS1) abritant les capacits de recherche - l'article explore lalocalisation des activits innovatrices des multinationales en France, et la relation entre les profils de spcialisation technologiquedes entreprises trangres et des entreprises indignes dans les rgions franaises.

Citer ce document / Cite this document :

Cantwell John, Iammarino Simona. The technological innovation of multinational corporations in the French regions. In: Revued'conomie industrielle. Vol. 109. 1er trimestre 2005. pp. 9-28.

doi : 10.3406/rei.2005.3062

http://www.persee.fr/web/revues/home/prescript/article/rei_0154-3229_2005_num_109_1_3062

John CANTWELL Rutgers Business School and University of Reading

and Simona IAMMARINO SPRU, University of Sussex and University of Rome "La Sapienza"

THE TECHNOLOGICAL INNOVATION

OF MULTINATIONAL CORPORATIONS

IN THE FRENCH REGIONS

Mots-cls : entreprises multinationales, innovation technologie, systmes rgionaux.

Key words : Multinational Corporations, Technological Innovation. Regional Systems.

I. - INTRODUCTION

The nexus between global and local processes has been investigated quite extensively by the literature of the most recent years. One particular and crucial aspect of such a relationship lies in the creation and diffusion of innovation, which, more than other economic processes, show rather complex patterns of distribution across space.

Indeed, as emphasised by Dicken, '"global' and 'local' are not fixed scales; rather, they represent the extreme points of a dialectical continuum of complex mutual interactions" (Dicken, 1994, p. 103). As a consequence, neither the orthodox approach - which traditionally considers both the (multinational) firm and the local system as black boxes whose behaviours are determined by exogenous factors; nor an entirely endogenous perspective - which tends to explain structure and growth mechanisms as the result of purely internal forces - seem appropriate to investigate the issue 'global versus local'. Rather, structure and behaviour of the two "extreme points" need to be considered within the context of their increasing interdependence, including both endogenous determinants and exogenous variables relevant to the analysis.

Following the line of our previous studies, this paper presents an analysis of the location patterns of multinational firms' innovative activities in France.

REVUE D'CONOMIE INDUSTRIELLE n 109, Ie- trimestre 2005 9

The paper is divided into five sections. The following section summarises the conceptual framework for the empirical study carried out here. After a short description of the data used for the empirical investigation, section three analyses the geographical distribution of innovative activities of large firms, both indigenous and foreign-owned, across the French regions in the period 1969- 95. Section four documents the characteristics of the hierarchy of regional research centres in France, by testing the relationship between the profiles of technological specialisation in foreign-owned and indigenous French firms. As we have suggested elsewhere, differences in the regional capacity of attraction of high value added activities serve as a prerequisite to unveiling the potential technological communication (or technological spillovers) that may be in existence within these regions and, indeed, across EU national boundaries. Finally, section five highlights the main implications that can be drawn, and our future research agenda.

II. - MULTI NATIONAL CORPORATIONS, TECHNOLOGICAL INNOVATION AND EUROPEAN REGIONS

It is widely accepted that the organisation of innovative activities can no longer be illustrated simply on the basis of concepts such as the dichotomy of market-hierarchies and the transaction costs mechanism as fundamental explanations of internalisation/externalisation of capabilities, functions and assets. Indeed, the trend has been increasingly observed for multinational corporations (MNCs) to establish internal (intra-firm) and external (inter-firm) networks for innovation, which are characterised by different levels of territorial and social embeddedness with reference to the location which hosts them. Regions, even belonging to the same nation-State, show different characteristics that determine the degree of attractiveness and the amount of spillovers that a region is able to draw. The choice of a particular location for a MNC to invest in research and development activities is thus driven by several factors, which can be summarised as "social capability" and "technological congruence" (Abramovitz, 1986; Fagerberg, Verspagen and von Tunzelman, 1994). While the first refers to the overall ability of the region to engage in innovative and organisation processes, the latter points to the distance of the region from the technological frontier, or, in other words, its capacity to implement the technical properties connected to the new knowledge.

Furthermore, it has been shown that MNC affiliates abroad have assumed a predominant role in an increasing proportion of all the most advanced technologies. The interpretation given is twofold: on the one hand, the ceaseless relevance of local innovation processes as reservoirs of different technical expertise in the globalisation era, and on the other, the outgrowth of an "organisational capital" which allows the integration of several related technological competencies across geographically dispersed units (Zander, 1997). Thus, the development of cross-border corporate integration and intra-border inter-company sectoral integration, as new forms of governance, makes it increasingly

1 0 REVUE D'CONOMIE INDUSTRIELLE n 109, 1er trimestre 2005

important to examine where and how innovative activity by MNCs is internationally dispersed and regionally concentrated (1).

Whilst the establishment in a foreign location facilitates the monitoring of developments in different technological fields, it also enables the extraction of local knowledge for MNC global networks (Cantwell, 1992, 1995; Chesnais, 1992; Granstrand and Sjolander, 1992; Dunning & Wymbs. 1997). In the case of the former, the firm is likely to be active abroad in technologies where complementarity between the strength of the host economy and its own expertise exists. In the case of the latter, a firm locates its research facility abroad to exploit the technological advantage of the host region either to reinforce its own competence or to alleviate its weakness at home. On this basis, it was therefore suggested that, behind location choices related to innovation, there are the two typical types of agglomeration forces, which operate differently across regions. The first can be termed "localisation economies", which are sector- specific and tend to intensify intra-border sectoral integration through local external networks between foreign-owned affiliates, indigenous firms and local non-market institutions. The second are referred to as general external economies, or "urbanisation economies", which attract all kinds of economic activities and tend to strengthen cross-border intra-firm integration, allowing the feedback of knowledge, expertise and information within networks of affiliates.

Arising from this differentiation of agglomeration economies, it became possible to distinguish between higher order and intermediate regional centres (2). Such centres arise "as a consequence of the interaction and the intensity of general external economies and localisation economies, which in turn depend upon the characteristics of the regional system considered" (Cantwell and lammarino, 1998, p. 387). Whilst in the case of an intermediate location, knowledge in specific technological fields is accessed and injected into the multinational network, affiliates located in higher order centres can enjoy a broader range of spillovers from the local environment. However, whilst there is evidence that much of the technology developed abroad by large firms lies in their core areas of strength (Patel and Vega, 1999) (3), MNC research in foreign locations is also increasingly associated with a higher pro-

(1) For an in-depth discussion on the linkages between the globalisation of innovation and regions - which highlights the importance of location in the globalisation process and therefore the supremacy of a regional approach when analysing this phenomenon - see Cantwell and lammarino (2003).

(2) The other extreme is that of lower order regions, i.e. technologically weak and backward regions that have an inadequate innovative base in order to compete with other locations and to be attractive for external flows of knowledge and technology.

(3) This suggests that adaptation and technical support to foreign manufacturing plants continue to be major explanatory factors.

REVUE D'CONOMIE INDUSTRIELLE n 109, 1er trimestre 2005 1 1

bability of entry into new and more distantly related fields of technology. Such knowledge-seeking activity is undertaken to help define the future directions in the evolution of the corporations' sources of competitiveness (Pearce, 1999).

The relationship 'global versus local' implies a mounting competitive bidding in order to attract external sources of knowledge and technological competence, by which to enhance the regional knowledge base (4) and tap into the full growth potential of globalisation. The sufficient condition to take part to the competitive bidding, especially within the European economic arena, is clearly the dynamics (upgrading/diversification) of regional technological advantage and the ability to provide opportunities in the most promising technological fields. Such an ability is strictly related to the regional capacity to engage in "institutional learning", i.e. to adjust the local institutional structure in order to support, sustain and enhance the development of new technologies and to adapt to the prevailing technological paradigm. Thus, the "institutional comparative advantage" of the regional economy is often the underlying reason for a more dynamic technological performance and of the gradual shift of the regional specialisation towards the fastest growing areas of innovative activity. Obviously, not all regional cores are able to adjust their profiles of specialisation to the highest technological opportunities: the cumulative and location-specific nature of technological process might eventually imply the rise and the decline of technological poles within Europe.

III. - MNC RESEARCH LOCATION IN THE FRENCH REGIONS

As in our previous studies, the geographical unit of analysis used to explore the French case is based upon sub-national entities that derive from normative criteria, as classified by Eurostat in the Nomenclature of Territorial Units for Statistics (NUTS), providing a single uniform arrangement of territorial systems. The comparable NUTS level chosen here for France is NUTS 1. The empirical investigation uses patents granted in the US by the US Patent and Trademark Office (USPTO) to the world's largest industrial firms for inventions achieved in their French-located operations over the 1969-1995 period, classified by the host region in which the research facility responsible is located. Each patent was classified into one of 56 technological sectors derived by mapping from the primary classification of the USPTO and organising patents into common technological groups (see Appendix for the resulting 56 sectors). For further discussion of the data and the rgionalisation of the patent database see Cantwell and Iammarino (1998, 2000, 2003).

(4) We use the word 'enhance' and not 'construct' because the existence of such a base is a necessary, although not sufficient, prerequisite in order to have attraction capacity and thus to be a regional centre of excellence, either as a higher order or as an intermediate location.

1 2 REVUE D'CONOMIE INDUSTRIELLE n 109, 1er trimestre 2005

A few selected indicators by region - relative to the end of the period to which our database on US patents refers - may provide a brief picture of the relative size of the French regions. Ile de France appears to be the only region well above the national average for most indicators: its economic relevance is leading also when compared to the EU average - the index of GDP per capita in the middle 1990s being above 175 with respect to the base (EU15=100). More generally, the most economically advanced areas are certainly those around the capital region, the centre and the centre-east of the country, which show a GDP higher than the EU average.

Looking at innovation variables, according to the National Innovation Survey the most innovative areas are identifiable within the southern and eastern belt of Ile de France (within the Bassin Parisien region) - where in fact the greatest concentration of innovative firms is found by the Survey - whilst the north-west and the south of the country appear to be relatively lagging behind. Such a difference in the geographical spread of innovative activities is mainly attributed to the regional industrial structure - i.e. the industrial sectors most represented in the eastern part of France are those in which small and medium enterprises (SMEs) show a relatively stronger propensity to innovate - and to the effects of local policies for research and technological development (Ministre de l'Industrie, 1994).

Even accounting for demographic and economic size, both in terms of R&D expenditure (as a percentage of GDP) and of R&D personnel (as a percentage of active population) le de France drives up the national figure: 3.3% against a national average of 2.4% in the case of the former indicator, and 2.3% against 1.5% with respect to the latter (5). It has to be remembered that, in absolute terms, the highest R&D expenditure among all EU regions (at the comparable geographical level) is indeed that of Ile de France: more than 11,400 million of euros in 1995 (the same figure, for example, for the South East of the UK was approximately 6,000). Moreover, the French capital region is at the top of the ranking among the EU regions which are both wealthy (per capita GDP above the EU average) and innovative (R&D as a share of GDP above the EU average) (Eurostat, 2000).

Turning to the indicator used in the present work, Table 1 reports the shares of patents granted by the USPTO to large corporate inventors - both the largest French firms and the largest French-located foreign-owned firms - attributable to research facilities based in the French regions (6). First of all, in terms of absolute size of large firms' patenting activity, France, showing

(5) It is worth mentioning that, in 1995, the capital region accounted for nearly 50% of total national R&D expenditure (Eurostat, 1999).

(6) The dpartements d'outre-mer are not considered here, as they do not register any US patents by large firms in the period considered. Thus, there are 8 regions included in Table 1, instead of the 9 NUTS1 French regions.

REVUE D'CONOMIE INDUSTRIELLE n 109, Ier trimestre 2005 1 3

28,106 patents in the period 1969-95 as a whole, represents less than one third of the overall activity carried out in Germany (with 92,058 patents), lags well behind the UK (with 35,219), but is far above Italy (with 7,040). The share of foreign-owned firms in the overall total is 25.6%: this is consistent with other studies on the economic role of foreign-owned affiliates, which in fact place France in an intermediate position between the highly globalised character of the research carried out in the UK and the endogenously-based strength of German technological competence (OECD, 1999) (7).

It is interesting to report a few features which characterise corporate innovation in France, as they emerge again from the National Innovation Survey (8). In general terms, foreign-owned affiliates show on average a stronger propensity towards product innovation than their nationally-owned counterparts, which seem to be relatively stronger in process innovation. They differ significantly also with regard to the sources of innovation: whilst foreign- owned firms rely more on external sources, indigenous French firms build primarily on in-house research (Dupont, 1994). To some extent, this might be interpreted as a relatively more pronounced tendency by foreign-owned affiliates to establish inter-firm networks for innovation as part of the overall strategy of MNCs outside their country of origin. Moreover, foreign-owned firms

(7) France is ranked between the UK and Germany in terms of both the foreign affiliate share of R&D expenditure and the share of production (turnover) in manufacturing (OECD, 1999).

(8) The Survey referred to the innovative activities undertaken in the period 1986-91. The source of information is Dupont (1994).

Table 1 - Shares of US patents of both the largest French firms and the France-located foreign-owned firms, attributable to research

in the French regions relative to France as a whole, 1969-95 (%)

REGIONS

Ile de France Bassin Parisien Nord-Pas-de-Calais Est Ouest Sud-Ouest Centre-Est Mditerrane

Total France (absolute nos.)

French firms

58.3 8.4 1.3 3.6 2.3 4.7

17.4 4.0

20902

Foreign firms

58.2 14.0 1.0 7.0 2.2 1.9 6.9 8.7

7204

Total

58.3 9.8 1.2 4.5 2.3 4.0

14.7 5.2

28106

14 REVUE D'CONOMIE INDUSTRIELLE n 109, 1er trimestre 2005

show on average a greater sensitivity to the association between technological innovation and organisational innovation, which is a crucial aspect in the capacity of firms to source competencies in various foreign locations.

As emerges from Table 1, geographical agglomeration turns out to be as outstanding in the French case as in other comparable economies: with reference to the first regional core, more than 58% of the overall patenting activity is concentrated in Ile de France, followed by the Centre-Est, with almost 15%, and Bassin Parisien, with slightly less than 10%. The latter region, however, is the second most popular location for foreign research carried out in the country (14%), whilst the Centre-Est ranks fifth in order of importance, accounting only for 6.9% of foreign-owned France-based patenting, in spite of having the second largest share of indigenous research (17.4%).

The high geographical polarisation of innovation generated in MNCs drove our choice to restrict the analysis at a more detailed level to the three regions mentioned above, since the absolute numbers of patents granted in the other regional sites is too low for meaningful statistical analysis. It is necessary to bear in mind, however, the differences in the degree of attractiveness of external resources that - even in comparison with the patterns of spatial distribution of indigenous research - mark out these three regional systems, which per se lend support, at least at first glance, to our hypothesis of the existence of a regional hierarchy within national boundaries.

The sectoral distribution of patents demonstrates interregional differences to an even greater extent. Table 2 reports the foreign shares by sector and region (foreign-owned firms' percentage of total patents granted to large firms for research located in the region) in the 27 years considered (9). The highest contribution of foreign research to the regional total is recorded in Bassin Passin (36.5%), which is much above that observed for le de France (25.6%, identical to the national average); as expected, the Centre-Est is far less attractive - with the foreign share accounting for just 12% of regionally -based research.

It is interesting to note that, in all cases, the most relevant contributions of foreign-owned research to the local totals are found in some fast-growing and 'general purpose' technological fields, which are likely to lie at the heart of spillovers between indigenous and foreign-owned firms. This is particularly the case of Information and Communication Technology (ICT) sectors - such

(9) Some of the technological sectors were dropped from the table on the grounds of the relatively small number of patents for corporate research in the country as a whole, the outcome being that only 31 sectors are reported in Tables 2 and 3 and thus discussed in the text. However, the total 56 refers to the total number of patents for all 56 technological sectors. The key to the sectoral codes is given in the Appendix.


Table 2 - Foreign shares (foreign-owned firms' percentage of total patents granted to large firms for local research in France),

by sector and region, 1969-95

SECTORS

3 5 7 9

10 11 12 13 14 16 17 20 23 28 29 31 33 34 35 36 37 38 39 40 41 42 49 50 51 53 56

Total Tech56

ILE DE FRANCE 3.6

13.9 22.1 17.5 4.8

40.5 35.3 16.0 25.0 12.8 21.0 28.9 20.4 7.3

29.4 12.8 35.6 38.4 17.9 29.9 14.0 20.5 17.7 30.0 35.4 13.0 10.5 27.3 2.2

30.9 16.1 25.6

REGIONS

BASSEV PARISIEN 10.8 44.5 38.3 10.9 5.3

11.5 50.0 25.6 49.4 30.5 36.2 52.0 28.6 33.3 37.6 15.8 50.0 50.0 25.0 60.0 65.9 56.6 66.0 77.9 75.6 51.4 45.2 4.8

32.8 45.8 9.8

36.5

CENTRE-EST 1.0

10.9 4.8 5.3 6.3 2.5

27.5 9.6

22.4 9.8

16.0 3.7

50.0 34.4 40.5 25.0 25.0 27.6

- 2.4 5.6

15.8 18.7 13.5 14.1 60.0 3.5

10.1 2.8

25.8 22.7 12.0

FRANCE

5.5 18.6 23.6 17.0 17.1 25.5 37.5 13.7 24.9 18.1 19.6 28.9 21.9 23.6 29.0 13.1 42.4 39.8 18.9 28.3 19.9 24.6 20.4 39.7 40.2 24.7 13.1 19.3 8.9

30.4 16.2 25.6

as Telecommunications (33, 34), Semiconductors (40) and Office equipment and data processing systems (41) - but also of Other general industrial equipment (29) and Other instruments and controls (53). A high foreign share at both national and regional levels is observable in Pharmaceuticals and biotechnology (12).

As expected - and in line with what was observed for the South East in the UK, Baden Wrttemberg in Germany and Lombardia in Italy - the sectoral


distribution of foreign-owned companies' shares of regional and national research activity shows a very high degree of correspondence between le de France and the country as a whole. However, contrary to what was observed in the UK and Italian studies, which, for the regional centres other than the most prominent one, showed more focused and locally specific sectoral patterns in the distribution of foreign participation in regional research, the other two French regions indicate foreign contributions that are relatively widespread at a sectoral level. This is especially the case of Bassin Parisien, which shows remarkably high foreign shares in all sectors classified as various categories of electrical equipment (and not only in those identifiable as ICTs) - such as Illumination devices (37), Electrical devices and systems (38) and Other general electrical equipment (39) - and also in some chemical processes (5 and 7). The Centre-Est shows foreign shares that are well above average in a different set of mechanical fields, such as for example Mining equipment (23) and Other specialised machinery (28), which have instead relatively lower values in the other regional cores and in the country as a whole.

Looking at the evolution over time of, respectively, the French-owned and foreign-owned firms' total number of patents, it emerges that both French and foreign patenting have followed a rather similar and discontinuous path: increasing in the earliest 1970s, with a sharp downturn in the latter half of the decade - which fell to a trough in 1979 - and then increasing again up to the beginning of the 1990s, since which time the trend has been declining (see also Cantwell and Kotecha, 1997). The evolution of foreign shares between 1969 and 1995 shows a great deal of differentiation across regions. le de France and the country as a whole have rather stable foreign shares, whose development over time is almost coincident, becoming divergent only in the last years observed. Bassin Parisien has been characterised by a very high degree of fluctuation: although the foreign contribution to total regional patenting has remained the highest throughout almost the whole period, in 1995 it was more or less at the same level as at the end of the 1960s. The Centre-Est has instead followed a steadily increasing trend which, in the early 1990s, has enabled this region to overtake the capital core in terms of foreign share of research activity.

In general terms, the above picture confirms the traditional representation of the French innovative and economic system, which is known to be one of the most geographically hierarchical in Europe. The centralisation of actors and activities - firms, capital, infrastructures, innovation, lobbies - within the Paris region has been recognised as one of the key structural factor of the French economic geography, and also the gradual process of decentralisation undertaken during the 1970s and the 1980s was organised in hierarchical terms (sometimes viewed rather as a 'metropolitanisation' process). Indeed, contrary especially to the Italian examples of agglomeration - such as the famous industrial districts - French local systems are much more 'urban systems', i.e. growth poles represented by large industrial cities (a typical example is, Grenoble in the Centre-Est), with weak connections with the rest of the territory, highly

REVUE D'CONOMIE INDUSTRIELLE n 109, 1er trimestre 2005 1 J

integrated within the national economy and showing direct relationships with the State (Le Gales et al., 1999). Moreover, as also the comparison within the EU area clearly highlights, since the 1980s le de France has captured the bulk of economic growth in France in relation to the internationalisation and multi- nationalisation processes that have involved the national economy (see also Mucchielli, 1998; Crozet et al, 2004).

IV. - TECHNOLOGICAL SPECIALISATION AND THE REGIONAL HIERARCHY IN FRANCE

4.1 Comparative regional technological advantages

As highlighted elsewhere, one of the main drawbacks of using absolute numbers of patents is the difficulty associated with then making comparisons between the activity of heterogeneous areas of technological endeavour. Since the propensity to patent is higher in certain fields of activity (for example, pharmaceuticals), this poses potential problems when undertaking comparative analyses. This can be circumvented, however, by employing the Revealed Technological Advantage (RTA) index, a technique first applied by Soete (1987) and subsequently developed by Cantwell (1989, 1993). It is a proxy for technological specialisation and is calculated in the following way:

where: P^ = number of patents granted in region i in technology j Pwj = number of world patents granted in technology j

The RTA for a given region in a specified technology will vary around unity. An index greater than one indicates a relative advantage (or specialisation) in this technology, whereas an index less than one points to a relative disadvantage (10).

Table 3 reports the RTA values by region and France as a whole (11), and sector. The overall picture seems to indicate some peculiarities, also with respect to our previous EU studies. First of all, although the technological advantages of both the nationally-owned and foreign-owned firms are - as expected - more widely dispersed at the sectoral level in the country as a whole (the cross-sectoral variance in the RTA index of France is the lowest), the sectoral

(10) Note that this is a proxy for relative (as opposed to absolute) advantage. A small region could demonstrate a high RTA in a particular sector but this could actually be associated with a low patent count in absolute terms.

(11) In this case the index obviously considers 2, where i = 1,...., 9 (the 9 NUTS 1 regions).

1 8 REVUE D'CONOMIE INDUSTRIELLE n 109, Ie' trimestre 2005

concentration is higher for indigenous firms than for foreign affiliates in all cases (12). The highest value is found in the capital region, where local firms show the strongest technological competence in Bleaching and dyeing (10) - which however does not attract at all external resources, as appears in terms of foreign shares - and Special radio systems (35) - which instead is also the highest comparative advantage of foreign research located in the region. Besides the latter sector, in both le de France and the country as a whole the technological specialisation of foreign-owned affiliates overlaps with that of local firms also in the 'general purpose' technological areas of Miscellaneous metal products (14), Other general industrial equipment (29) and Telecommunications (33), and in Pharmaceuticals and biotechnology (12). In the latter case, it should be remembered that France imposes a local research requirement on companies that sell to its health authorities, thus the matching between foreign research and the local one may be partially due to this regulatory constraint. From Table 3 it is rather evident that the sectoral concentration of indigenous research in the capital region drives the distribution of foreign research to a much greater extent than in the case of France, where indigenous firms (and, only in some cases, foreign affiliates) are advantaged also in Other organic compounds (11), Metallurgical processes (13), and in some 'general purpose' technologies (or GPTs) such as Other specialised machinery (28) and electrical systems (37 and 38). Another relevant point to notice is that, notwithstanding the fact that le de France records the highest concentration of innovative efforts of indigenous large firms, the cross-sectoral variance of foreign-owned technological activity is the lowest amongst the three regions.

Contrary to what was observed in the UK and in Italy, the other two French regional centres display, even at a first glance, a relatively lower overlapping between nationally-owned and foreign-owned firms' innovative activities. Particularly in the case of Bassin Parisien - where comparative advantages of both categories of firms are found in some chemical processes (5 and 7), in some specialised equipment (16 and 17), in general and specialised industrial equipment (28 and 29) and in Rubber and plastic products (49) - the difference is striking between local and foreign technological profiles in some groups of technologies. In fact, while indigenous large firms are highly specialised in the group of other organic chemicals (9 and 11) - where foreign research not only is completely despecialised, but also in terms of the contribution to the regional total its share is negligible - foreign -owned affiliates show a very strong specialisation in various categories of electrical equipment (37, 38 and 39), Semiconductors (40) and Internal combustion engines (42), in which indi-

(12) This is consistent also with studies on MNC locational choices of production activities in the French Departments (Crozet et al., 2004). It is also worth mentioning the high comparative advantage of French-owned firms in Aircraft (44), shown by le de France, Bassin Parisien and France as a whole: in this sector, a traditional point of strength of the country, no foreign patents are recorded at all.


Table 3 - RTA index (French and Foreign firms) relative to the world, by sector and region, 1969-95

SECTORS

3 5 7 9

10 11 12 13 14 16 17 20 23 28 29 31 33 34 35 36 37 38 39 40 41 42 49 50 51 53 56

Total Tech56 Standard deviation

ILE DE FRANCE French firms

1.723 0.906 0.705 0.367 5.147 0.709 1.588 0.883 1.273 0.891 1.042 0.436 1.277 1.375 1.590 2.303 1.673 0.976 4.844 0.830 1.533 1.212 0.942 0.724 0.846 1.128 0.657 0.641 1.250 1.108 1.427 1.000 1.059

Foreign firms 0.185 0.427 0.582 0.227 0.752 1.403 2.521 0.491 1.237 0.381 0.804 0.515 0.954 0.316 1.929 0.988 2.691 1.771 3.071 1.029 0.724 0.911 0.589 0.903 1.346 0.491 0.224 0.700 0.081 1.439 0.797 1.000 0.747

REGIONS BASSIN PARISIEN

French firms Foreign firms 3.647 1.309 1.416 1.891 2.490 1.693 0.809 0.751 0.884 1.529 1.302 0.758 0.617 1.376 1.003 1.022 0.491 0.496 0.604 0.151 0.604 0.624 0.420 0.605 0.107 0.682 1.945 2.434 1.585 0.591 2.137 1.000 0.788

0.768 1.824 1.526 0.402 0.240 0.382 1.404 0.448 1.496 1.164 1.285 1.426 0.429 1.195 1.049 0.333 0.853 0.861 0.349 0.392 2.028 1.411 1.417 3.700 0.572 1.251 2.786 0.214 1.342 0.867 0.401 1.000 0.774

CENTREEST French firms

2.523 1.701 1.642 2.253 0.997 2.202 0.420 1.590 0.552 1.065 1.195 0.790 0.297 0.695 0.383 0.092 0.213 0.385 0.000 0.495 0.658 1.519 0.672 0.443 0.284 0.255 5.095 1.060 1.282 0.489 0.472 1.000 1.008

Foreign firms 0.194 1.519 0.601 0.920 0.487 0.413 1.166 1.238 1.166 0.846 1.666 0.222 2.171 2.663 1.912 0.225 0.519 1.074 0.000 0.088 0.283 2.092 1.131 0.507 0.341 2.801 1.368 0.869 0.272 1.248 1.016 1.000 0.751

FRANCE

French firms Fore 2.450 1.108 0.919 0.924 3.489 1.139 1.269 1.039 1.198 1.025 1.248 0.580 1.091 1.168 1.294 1.494 1.238 0.841 2.978 0.703 1.104 1.112 0.929 0.623 0.636 0.794 1.602 0.885 1.163 0.920 1.380 1.000 0.640

ign firms 0.417 0.735 0.825 0.548 2.085 1.130 2.205 0.479 1.150 0.656 0.885 0.684 0.885 1.046 1.531 0.652 2.647 1.615 2.007 0.806 0.793 1.053 0.692 1.191 1.238 0.756 0.698 0.613 0.329 1.168 0.773 1.000 0.559

genous competence turns out to be rather weak (also in terms of shares of total regional patenting, much lower than the equivalent foreign shares).

In the Centre-Est, where two of the most important urban centres of the country, namely Lyon and Grenoble, are located, the sectors in which both foreign-owned and national firms register a comparative advantage are Rubber and plastic products (49), Electrical devices and systems (38), Metal working equipment (17) and Chemical processes (5). As in Bassin Parisien, specialisation profiles differ substantially in chemical technologies, which represent a point of strength in the local pattern of specialisation whereas foreign-owned patenting is rather marginal and despecialised; on the other hand, the latter is remarkably strong - both in terms of RTA values and foreign shares - in some specialised and general machinery (23, 28 and 29), in which fields indigenous firms' competence in the region turns out to be quite feeble, in spite of the relative strength shown at the national level.


4.2. The regional hierarchy

In order to further investigate our hypothesis of a geographical hierarchy of regional centres within the national borders, a simple regression analysis was carried out.

The cross-sectional regression analysis, used to ascertain the relationship between foreign-owned and indigenous firms' research activities, was carried out firstly for each of the three regions (the relevant subscript i = 1,2,3) and for France as a whole for the overall period 1969-95. In the regional cases, the adjusted version of the RTA index was used, for the purpose of overcoming the potentially skewed distribution owing to a smaller number of patents at the sub-national level (unlike for the country as a whole) (13). The regression was run across all 56 technological sectors (subscript j) for the following equation:

adjRTAFORjj = a + adjRTAFREjj + e^ [1]

where i = 1 for le de France, i = 2 for Bassin Parisien and i = 3 for Centre- Est. For France as a whole we have: RTAFORj = a + RTAFREj + Ej

The period was then subdivided into 1969-82 and 1983-95, in order to test the relationship between the technological specialisation of foreign-owned subsidiaries and that of indigenous firms at the two different geographical levels - regional and national - over time. In this latter case we adopted a Granger notion of sequential causality, and we ran the regression across 47 technological sectors (14) :

adjRTAFOR]jt = a + adjRTAFREijt_, + eijt [2]

and at the national level: RTAFORt = a + RTAFREjt.] + eJt, where t refers to the period 1983-95 and t-1 to 1969-82.

Table 4 reports the statistics of the regional regressions for equation 1. First of all, contrary to the results obtained in the case of the South East in the UK, Lombardia in Italy and all six higher order German regions, in the main technological core of the country, le de France, the aggregate patenting activity of foreign firms located in the region is dependent upon the technological spe-

(13) The adjusted RTA is given by: adjRTA^ = (RTAy - l)/( RTAy + 1), ranging from -] to +1: values between 0 and 1 (between 0 and -1) indicate a comparative advantage (disadvantage) of region (/) in sector (/') relative to the world.

(14) The reason for having a smaller number of sectors in the lagged cross-section model is that, when we subdivided the period 1969-95, we dropped all the technological sectors with an overall number of patents less than 600 in the world total in both 1969-82 and 1983-95. The purpose was to avoid the inclusion of sectors with a relatively low propensity to patent at the world level.


Table 4 - Results of the regional regressions for 1969-95 (equation 1)

le de France (i=l) adjRTAFRE i} INPT

LM Diagnostic Statistics A

Serial Correlation X2(l) Normality X2(2) Heteroscedasticity X2(l)

Bassin Parisien (i=2) adjRTAFRE 2j INPT


Serial Correlation X2(l) Normality X2(2) Heteroscedasticity 5C"(1)

Centre -est (i=3) adjRTAFRE 3j INPT


Sena 1 Correlation X2(l) Normality X~(2) Heteroscedasticity X2(l)

Coefficient 0.22839 -0.18912

0.33063[0.565] 2.1949[0.334] 0.66196[0.416]

Coefficient -0.045365 -0.21065

0.6642[0.415] 3.6451[0.162] 2.4285[0.119]

Coefficient 0.13920 -0.33500

0.4068[0.524] 4.0318[0.133] 4.1528[0.042]

Standard Error 0.11200 0.049363



T-Ratio [Prob] 2.0392[0.046]** -3.8312[0.000]***

T-Ratio [Prob] -0.3274[0.745] -2.9215[0.005]***

T-Ratio [Prob] 0.8420[0.403] -3.6919[0.001]***

No. of observation: 56 *** significant at 1% ** significant at 5% * significant at 10% A the LM test statistics reported are asymptotically distributed as a X random variable; where X2 (DF=l)0.05 critical value is 3.84 and X2 (DF=2)0.05 critical value is 5.99

cialisation of indigenous firms (the coefficient is significant at 5%). Therefore, as a first approximation, this would suggest that le de France is configurable as an intermediate region, rather than as a region at the top of the geographical hierarchy within its own country, as it displays the pattern of technological overlapping between foreign subsidiaries and local firms that was found to be typical of intermediate regional centres of excellence. This is also true when looking at the regression over time.

22 REVUE D'CONOMIE INDUSTRIELLE n 109, Ier trimestre 2005

Bassin Parisien and France as a whole show instead a pattern which is representative of higher order locations at the top of the hierarchy: the specialisation of foreign-owned firms does not depend on the technological advantage of French firms, suggesting that there might be other factors - more general kinds of spillovers and locational advantages - bringing foreign firms to locate their research facilities into these areas. The case of Centre-Est is again less clear-cut: the results obtained seem to indicate a relative degree of overlapping in the technological profiles of foreign-owned patenting in the second period (t) and French-owned patenting in the first time period (t-1) (the coefficient for Centre-Est is significant at 10%), whilst the correlation is not significant for the overall period.

Yet, these results are puzzling only at a first glance. First of all, as also expected, France emerges as a country at the top of the European ranking, in line with its relative position, as already discussed, somehow half-way between Germany and the UK, and much above Italy in terms of the relative size of its innovation potential. Indeed, the absence of any significant relationship between foreign innovative activity and that of indigenous firms was found as in the case of the UK and Germany, contrary to the overall Italian model, in which the specialisation of the foreign and Italian large firms matched for the overall period and even more through time.

As far as le de France is concerned, there are clear factors underpinning the peculiarity of the results obtained. As also mentioned above, from our previous findings it turns out that foreign-owned research in higher order regions is not attracted by any particular local strength, but rather by inter-industry agglomeration externalities, sourcing especially 'general purpose' technologies. In the case of le de France the regional comparative advantages lie, in the main, precisely in the areas of the leading GPTs. This is consistent with what has been shown by Cantwell and Iammarino (2001) - carrying out a more in-depth inspection of change, stability and strengthening of technological comparative advantages across European regions over time - in which the French capital region records one of the strongest concentrations in terms of number of sectors showing a consolidation of technological specialisation; such a process seems indeed to have occurred particularly in GPTs and in core technological systems. This suggests that foreign-owned firms from a wider range of industries than locally are attracted into the region, but their technological focus is then similar to the local structure of comparative advantages - i.e. overlapping in ICT [telecommunications and radio systems (33 and 35), a traditional French strength], metal working and general machinery (14 and 29), and general instruments (53), all of which are leading GPTs.

To further corroborate this interpretation, an additional inspection was carried out with reference to the industry of output of large firms located in the French regions. In the case of le de France, this exercise confirmed that foreign-owned firms are from a different range of industries as compared to French firms, as shown by a negative correlation coefficient between the two RTA dis-

REVUE D'CONOMIE INDUSTRIELLE n 109, 1er trimestre 2005 23

tributions when constructed by industry of output. Therefore, it is possible to conclude that this is clearly a higher order region, insofar as the similarity of the indigenous and foreign technological profiles can be viewed as a coincidental consequence of the regional pattern of technological specialisation within the firms of different industries.

With regard to the other two regions, as seen above Bassin Parisien does not create problems in its identification as a higher order centre. The Centre-Est, instead, should be definitely categorised as an intermediate regional location. The main argument, supported quite clearly looking at patents at the firm level, is that foreign-owned firms are here attracted to conduct local research in sectors in which there is indeed a strength owing to local firms but, given that the foreign entrants are often classified in a related rather than the identical industry, they locate allied research also into what (for them) is the primary technological field (which is not necessarily a local specialisation, although it can be related to the area of local strength). In other words, in the case of Centre-Est there is indeed a specialised attraction of the kind which is expected in technologically intermediate regions, but this is obfuscated by the fact that it relies in part on technological overlaps between firms of related but distinct industries. However, at the aggregate level, only in this region was a positive correlation found between the overall distribution of indigenous and foreign-owned firms across industries, giving further support to the idea that the exchange of competence and knowledge in this location is much more focused than in the other two regional cores and mainly of an intra-industry kind, and at the very least occurs between quite closely related industries.

V. - IMPLICATIONS AND CONCLUSIONS

The French case has shown that the regional hierarchy is far from being a clear-cut and rigid classification of local contexts within and across EU national borders. A categorisation without an identification of the types of areas would have implied an oversimplification of the complex interactions between the global and the local dimensions of the generation of technological innovation. As already highlighted, distinctiveness and specificity are the key-words in analysing national and regional systems of innovation. The results obtained for France and its regional cores fit with our existing framework, providing further insights on the nature of the regional hierarchy on the basis of the relevance of GPTs and core technological systems in higher order centres, and on the technological overlapping of large firms operating in sometimes different but allied industries in intermediate regions. We have concluded that in both le de France and Bassin Parisien - as in France as a whole - the exchange of knowledge is essentially inter-industry, while in the intermediate region of the Centre-Est it has much more of an intra-industry character. It has been shown that foreign-owned affiliates tend to seek out all-round centres of excellence either for the diversification of their capabilities and/or for the development of GPTs, in which case their distribution by industry of output is likely to be relatively dispersed given the rather horizontal nature of such 'general purpose'


technologies. On the other hand, specialised technical expertise may attract external resources also from related industries - a mechanism through which intermediate centres might enjoy technological spillovers over a wider sectoral spread, possibly evolving into higher order regions.

However, the above results need to be interpreted also in the light of the peculiar character of the French innovation system, which distinguishes it from other EU countries to a rather large extent and provides a sounder framework for the explanation of underlying regional and national differences. These characteristics can be summarised as follows (Chesnais, 1993):

the pervasive State involvement in the generation not only of general scientific and technical knowledge, but also of technology per se, in the form of patentable and immediately usable new products or processes;

as already highlighted, one of the most distinctive features of the French economy is the relatively low level of territorial concentration, which differentiates it especially from the Italian case. The general economic centralisation within the capital region has always been a key structural feature of France, and even decentralisation has been strictly organised by the central State;

the existence of vertically structured and strongly compartmentalised technological sub-systems, such as electrical power, telecommunications, electronics, aerospace, transport systems, all involving a strong alliance between the State and public/private firms belonging to the oligopoly of the French industry. As also mentioned above, the role of the State in technological innovation is comparatively stronger than that in other EU countries, insofar as it is heavily present also in sectors in which government interference is usually quite low, such as in the chemical-pharmaceutical group;

large and very large firms have been the almost exclusive partners in such public-private technological alliances. Unlike in the case of Germany and, especially, Italy, in France the active role played by SMEs in the overall innovation system is rather limited.

The reasons for these peculiarities are rather complex and deeply rooted in historical processes. However, as pointed out by Chesnais (1993), two elements at least need to be mentioned: the inherent historical weakness of French capitalism, at the heart of the need for government support, and the role played by the "Grandes coles" in shaping the strong linkages between the State apparatus and the private sector. These elements underlie also the kind of hierarchical segmentation of the geographical space which is specific to the French case. In fact, Paris has been defined as the "thinking head of the national productive system" (Beckouche, 1991). The Paris region, and its complex concentration of large innovative French corporations, have benefited extensively of the vast projects of the Etat high tech aimed at building up a national capacity in leading GPTs. Thus, in the case of le de France, it seems possible to argue that the regional system "was massively structured by a particular technocratic combi-


nation of public and private actors", which is now in a process of adaptation and restructuring to global competition (Le Gales et al, 1999).

Finally, as the cases of le de France and Centre-Est have shown, there is the need to further improve our understanding of some aspects of the effects of innovation and globalisation on firms and regions - i.e. technological spillovers - by examining more in detail the patterns of MNC technological versus production specialisation in each region. Differences between the two specialisation profiles may be indicative of technological diversification by industry, and hence potential technological overlaps between industries, with important implications for the evolution of the regional innovation system as a whole.

REFERENCES

ABRAMOVITZ, M. (1986), "Catching up, forging ahead, and falling behind", Journal of Economic History, 46, 385-406.

BECKOUCHE, P. (1991), "French high-tech space: a double cleavage", in G. BENKO and M. DUNFORD (eds.), "Industrial change and regional development: the transformation of new industrial spaces", London and New-York, Belhaven Press.

CANTWELL, J.A. (1989), "Technological Innovation and Multinational Corporations", Oxford Basil Blackwell.

CANTWELL, J.A. (1992), "The internationalisation of technological activity and its implications for competitiveness", in O. GRANSTRAND, L. HKANSON and S. SJLANDER (eds.), "Technology Management and Internationa] Business: Internationalisation of R&D and Technology", Chichester, John Wiley.

CANTWELL, J.A. (1991), "The theory of technological competence and its application to international production" in D. McFETRIDGE (ed.), "Foreign Investment, Technology and Economic Growth", Calgary, University of Calgary Press.

CANTWELL, J.A. (1995), "The globalisation of technology: what remains of the product cycle model?", Cambridge Journal of Economics, 19, 1, 155-174.

CANTWELL, J.A. and KOTECHA, U. (1997), "The internationalisation of Technological Activity: the French Evidence in a Comparative Setting", in J. HOWELLS and J. MICHIE (eds.), "Technology, Innovation and Competitiveness", Aldershot, Edward Elgar.

CANTWELL, J.A. and IAMMARINO, S. (1998), "MNCs, Technological Innovation and Regional Systems in the EU: Some Evidence in the Italian Case", International Journal of the Economics of Business, 5, 3.

CANTWELL J.A. and IAMMARINO, S. (2000), "Multinational Corporations and the Location of Technological Innovation in the UK Regions", Regional Studies, 34, 3, 317-322.

CANTWELL J.A. and IAMMARINO, S., (2001), "EU Regions and Multinational Corporations: Change, Stability and Strengthening of Technological Comparative Advantages", University of Reading Working Paper.

CANTWELL J.A. and IAMMARINO, S. (2003), "Multinational Corporations and European Regional System of Innovation", London and New-York, Routledge.

CHESNAIS, F. (1992), "National Systems of Innovation, foreign direct investment and the operations of multinational enterprises" in B.A. LUNDVALL (ed.), "National Systems of Innovation", London, Pinter.

CHESNAIS, F. (1993), "The French National System of Innovation", in R.R. NELSON (ed.) "National Innovation Systems. A Comparative Analysis", Oxford and New-York, Oxford University Press.


CROZET, M., MAYER, T. and MUCCHIELLI, J.-L. (2004), "How do firms agglomerate? A study of FDI in France", Regional Science and Urban Economics, 34, 27-54.

DICKEN, P. (1994), "The Roepke Lecture In Economic Geography: Global-Local Tensions: Firms and States in the Global Space Economy", Economic Geography, 70, 2, 101-128.

DUNNING, J.H. and WYMBS, C. (1999) "The Geographical Sourcing of Technology Based Assets by Multinational Enterprises", in D. ARCHIBUGI, J. HOWELLS and J. MICHIE (eds), "Innovation Policy in a Global Economy", Cambridge: Cambridge University Press.

DUPONT, M.J. (1994), "Les filiales trangres en France: des atouts matres pour innover", in ministre de l'Industrie etc.

FAGERBERG, J., VERSPAGEN, B. and von TUNZELMAN, N. (eds.) (1994), "The dynamics of technology, trade and growth", Aldershot, Edward Elgar.

GRANSTRAND, O. and SJLANDER, S. (1992), "Internationalisation and diversification of multi-technology corporations", in O. GRANSTRAND, L. HKANSON and S. SJLANDER (eds.), "Technology Management and International Business: Internationalisation of R&D and Technology", Chichester, John Wiley.

Le GALES, P., ANNIELLO, V. and TIRMARCHE, O. (1999), "The Governance of local economies in France: after the Satet and national champions, emerging structure of local governance?", Mimeo.

Ministre de l'Industrie, des Postes et Tlcommunications et du Commerce extrieur (1994), "Les chiffres cls. L'innovation technologique dans l'industrie", Paris.

MUCCHIELLI, J.-L. (d.) (1998), "Multinational Location Strategy", Greenwich, JAI Press. OECD (1999), "Measuring Globalisation. The Role of Multinationals in OECD Economies",

Paris. PATEL, P. and VEGA, M. (1999) "Patterns of internationalisation of corporate technology:

location versus home country advantages", Research Policy, 28, 2/3: 145-155. PEARCE, R.D. (1999), "Decentralised R&D and strategic competitiveness: globalised

approaches to generation and use of technology in multinational enterprises (MNEs)" Research Policy, 28, 2-3,157-178.

SOETE, L. (1987), "The Impact of Technological Innovation on International Trade Patterns: the Evidence Reconsidered", Research Policy, 16, 101-130.

ZANDER, I. (1997), "Technological diversification in the multinational corporation - historical evolution and future prospects", Research Policy, 26, 209-227.

See Appendix next page


Appendix - The 56 technological sectors

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56

Food and tobacco products Distillation processes Inorganic chemicals Agricultural chemicals Chemical processes Photographic chemistry Cleaning agents and other compositions Disinfecting and preserving Synthetic resins and fibres Bleaching and dyeing Other organic compounds Pharmaceuticals and biotechnology Metallurgical processes Miscellaneous metal products Food, drink and tobacco equipment Chemical and allied equipment Metal working equipment Paper making apparatus Building material processing equipment Assembly and material handling equipment Agricultural equipment Other construction and excavating equipment Mining equipment Electrical lamp manufacturing Textile and clothing machinery Printing and publishing machinery Woodworking tools and machinery Other specialised machinery Other general industrial equipment Mechanical calculators and typewriters Power plants Nuclear reactors Telecommunications Other electrical communication systems Special radio systems Image and sound equipment Illumination devices Electrical devices and systems Other general electrical equipment Semiconductors Office equipment and data processing systems Internal combustion engines Motor vehicles Aircraft Ships and marine propulsion Railways and railway equipment Other transport equipment Textiles, clothing and leather Rubber and plastic products Non-metallic mineral products Coal and petroleum products Photographic equipment Other instruments and controls Wood products Explosive compositions and charges Other manufacturing and non-mdustnal

InformationsAutres contributions des auteursJohn CantwellSiraona Iammarino

Pagination910111213141516171819202122232425262728

PlanI. - IntroductionII. - Multi national corporations, technological innovation and european regionsIII. - MNC research location in the French regionsIV. - Technological specialisation and the regional hierarchy in France4.1. Comparative regional technological advantages 4.2. The regional hierarchy

V. - Implications and conclusionsReferencesReferences

IllustrationsTable 1 - Shares of US patents of both the largest French firms and the France-located foreign-owned firms, attributable to research in the French regions relative to France as whole, 1969-95 (%)Table 2 - Foreign shares (foreign-owned firms' percentage of total patents granted to large firms for local research in France), by sector and region, 1969-95Table 3 - RTA index (French and Foreign firms) relative to the world, by sector and region, 1969-95Table 4 - Results of the regional regressions for 1969-95 (equation 1)Appendix - The 56 technological sectors

Documents

Innovac Tecnol Gdes Empresas