Abstract
On the trend multinational enterprises establishing overseas R&D center in developing countries, Taiwan plays an important role. However, there is little literature to discuss how the host countries’ advantages of developing countries will affect the performance of overseas R&D centers. The study examines the relationship between the Taiwan’s location advantages and innovation performance of these R&D centers. Through literature review, this study synthesizes four location advantages: strong industrial clusters, talent pool, the strength of research base, and government support. Then, a location advantage-innovation performance research framework is proposed. Via MOEA’s MNE R&D Centers Database and interviews with top R&D managers, the dataset of location and performance factors in 38 R&D centers from 2003 to 2008 was gathered to feed in the systemic dynamic models. The systemic dynamic simulations revealed: (1) All four location advantages are positively influenced innovation performance of R&D centers; (2) Government subsidy is able to increase R&D hires, and R&D cooperation with domestic companies, universities, and research institutions. In turn, government subsidy creates a virtuous cycle to R&D spending. Finally, some policy implications are provided.