The Importance of Localized Related Variety for International Diversification of Corporate Technology

Internationalization of research and development has increased substantially in Europe in recent years, and particularly in Germany. This paper analyses the determinants of spatial distribution of foreign technological activities across 96 German regions (1996-2009). The paper identifies foreign technological activities by applying the cross-border-ownership concept to patent applications. The main proposition of the paper is that regions with higher related variety of technological activities between sectors attract more foreign technological activities. The estimation of a pooled count data model shows that this is the case. However, it applies only to regions characterized by a high overall technological strength. This finding suggests that related variety facilitates technological diversifications of foreign corporations in regions at the top of the geographic hierarchy within host countries.