Does internationalisation of technology determine technological diversification in large firms? The basic importance of technology internationalisation strategy

The purpose of the paper is to examine the relationship between technological diversification and internationalisation of technology for large multinational firms, operating at the world technological frontier. More precisely we address the question as to whether internationalisation determines diversification. The analysis is based on a rich database of the European patenting activity of 345 large multinational firms with the highest levels of patenting over two periods of time (1988-1990 and 1994-1996). The relationship is tested using a variety of different regression models. The results show that for the sample as a whole there is no statistically significant relationship between technological diversification and internationalisation of technology. However when the sample is disaggregated according to the predominant internationalisation strategy adopted by a firm, we find a statistically significant relationship. Our results show that in a cross-section of firms adopting a home-base-augmenting strategy, internationalisation determines the level of diversification. Thus amongst such large firms a higher level of internationalisation of technology is associated with a greater level of diversification. 1 We would like to thank OST for making their European patents database available to us. We have benefited from comments by Françoise Laville (OST) and Nick von Tunzelmann (SPRU). Special thanks to Christophe Sierra for his fruitful ideas and his encouragement, and to K. Touach for the statistical treatments. A first draft of this paper was presented at the Conference in honour of Keith Pavitt, What Do We Know About Innovation? Freeman Center, University of Sussex, 13-15 November 2003. We thank the participants, in particular V. Meliciani, for their comments.