Between 1997 and 2007, research and development (R&D) investments by foreign affiliates in the OECD area increased in value by USD 53 billion in purchasing power parity (PPP). Increases were observed in all major countries: the United States attracted USD 22.6 billion, Germany USD 8.9 billion, the United Kingdom USD 3.7 billion, Japan USD 5.1 billion, France USD 2.3 billion and Canada USD 1.9 billion.

The importance of foreign affiliates in national research and development (R&D) investments differs considerably across countries. In 2007, the share of foreign affiliates in business-sector R&D expenditure ranged from 5% in Japan to over 70% in Ireland. In Hungary, Belgium, the Czech Republic and Austria, which have many foreign multinationals, foreign affiliates were responsible for over half of the R&D investments.

The share of foreign-controlled affiliates in the total number of manufacturing-sector researchers tends to be slightly smaller than the corresponding ratio for research and development (R&D) expenditures. Information on the number of researchers working for foreign affiliates in the services sector has not so far been available.

The sectoral breakdown of the research and development (R&D) expenditure of foreign affiliates shows that in most countries the bulk of research is performed in the manufacturing sector. This is directly related to the fact that foreign affiliates are more active in manufacturing industries.

A closer look at the sectoral dimension of research and development (R&D) investments by foreign affiliates shows a particularly high share of foreign affiliates in R&D investments in smaller host countries.

European investment in the United States in 2007 accounted for over three-quarters of aggregate foreign research and development (R&D) investment. The leading R&D investing country in the United States was the United Kingdom, with 26% of the R&D investment of foreign-controlled affiliates, followed by Switzerland (15%), Germany (14%), France (13%) and Japan (10%).

Comparing the research and development (R&D) investments of a country’s affiliates abroad with those of foreign-controlled affiliates in that country gives a first, albeit incomplete, picture of R&D flows across countries. The contribution of multinational enterprises’ affiliates to R&D investments in home and host countries is very complex and cannot be grasped in simple comparisons.