Multinational corporations, patenting, and knowledge flow: The case of Singapore

Abstract

There has been an increase in the incidence of multinational corporations (MNCs) conducting research and development (R&D) in their overseas subsidiaries. 1 In deciding where to locate R&D activity, MNCs factor into consideration different forces that influence the costs and benefits of R&D. Using patent citations data and corporate information collected from various sources, I seek to answer two questions. First, is the R&D that MNCs carry out in their Singapore subsidiaries qualitatively different from that conducted in their headquarters? Second, does the R&D activity of the MNCs' subsidiaries facilitate knowledge flow from MNCs to the local Singaporean inventors? To answer the first question, I use a number of citations-based measures to compare the technological significance of patents taken out by MNCs' Singapore subsidiaries and their other patents. I take two steps to investigate the second question. There are no citations made by local Singaporean inventors to patents invented by MNCs' Singaporean inventors - not surprising given the extremely smaller numbers of patents of the two groups. Instead I focus on citations from local Singaporean inventors to patents that were taken out by MNCs having a subsidiary in Singapore but that were invented elsewhere. I first compare the frequency of a Singapore local patent citing a non-Singaporean MNC patent with that of a random rest-of-the-world patent citing such a patent - controlling for differences resulting from the technological area and the age of patents. The exercise is carried out for both random developing country and OECD country patents. I then use a probit model to examine whether the incidence of local Singaporean patents citing non-Singaporean MNC patents is related to the number of patents MNCs' Singapore subsidiaries take out. © 2004 by The University of Chigaco. All rights reserved.