VoxEU Column

Multinational companies are at the heart of two key globalisation trends: the fragmentation of production and the internationalisation of innovation. This column studies the global innovation activity of German multinationals, and finds that larger multinationals file more patents, of higher quality, at home and in more foreign countries both with and without affiliates. Multinationals follow countries’ comparative advantages in innovation, and more frequently pursue basic (science-based) innovation than applied (non-science-based) innovation abroad, but co-locate it with production less frequently. The findings inform the scope for multilateral deep agreements that span tariff reductions, investment promotion and intellectual property rights protection.