Choice of Foreign R&D Entry Mode and Its Relation to Firm Performance: A Firm-level Analysis for Switzerland and Austria

Abstract

The objective of this study is to identify the determinants of a firm’s foreign entry mode choice and the relationship between mode selection and firm performance for the specific case of R&D—a topic not yet investigated in entry mode research. Separate estimates of a Heckman selection model for Austria and Switzerland based on comparable firm-level data and variable specification show for both countries that the OLI model is well-suited to explain not only the propensity to invest in R&D abroad but also the related choice between an equity-based and a non-equity governance mode. Moreover, the research reveals that foreign R&D activity is positively related to firm performance and that this relationship is stronger in the case of an equity-based mode of governance, however only in the Swiss case. The differences between the two countries primarily reflect the much higher degree of internationalisation of the Swiss economy.