Clustering, MNEs and innovation: Who benefits, and how?

This paper explores three under-researched questions in the literature on multinational enterprises (MNEs), clustering and innovation. Firstly, to what extent does multinationality lead to higher rates of innovation activity and performance? Secondly, what, if any, is the link between MNE cluster location and innovation inputs and outputs? Thirdly, are there any significant differences between enterprises belonging to domestic and overseas MNEs in these regards? Evidence is based primarily on 11,775 firms derived from the UK Community Innovation Survey 2007. Diversity in the regional economy exerts the most consistent positive influence, followed by the scale of employment in the enterprise’s own industry. Enterprises belonging to domestic MNEs appear to exert higher levels of innovation effort, however evidence regarding their superiority in innovation outputs was weaker. Contrary to Porter, it appears that enterprises belonging to overseas firms benefit more than domestic firms.