Whither geographic proximity? Bypassing local R&D units in foreign university collaboration

Abstract

MNCs often engage in international research collaborations with foreign universities through one of their central R&D laboratories (at headquarters or elsewhere) even though they operate a local R&D unit close to that university, and hence forego the benefits of geographic proximity and local collaboration. Drawing on the knowledge-based theory of the firm, we hypothesize that the choice between distant and local collaboration systematically relates to the knowledge capabilities of the firms' R&D units, the characteristics of the focal knowledge, and local knowledge leakage risks. Analysis of close to 13,000 research collaborations with foreign universities by the world's major biopharmaceutical firms (1995-2015) confirms that collaboration at distance occurs if this allows the firm to benefit from scale and knowledge diversity advantages, if the central unit has strong basic research capabilities, and if collaboration is in a core research domain of the MNC while rival firms are locally present. Maturity of the focal research domain is associated with local collaboration. Our findings qualify the common arguments in favor of collaboration in proximity and suggest that (distant) central R&D units are important orchestrators of research collaboration with universities around the globe.