Study on the relationship between the localisation of production, R&D and innovation activities

The main objective of this study for the European Commission, DG Enterprise, was to understand the drivers behind a firm's decision on where to geographically locate production, and the influence of that decision on the geographical location of the firm's R&D and innovation activities.  Our report has been published here: http://ec.europa.eu/DocsRoom/documents/6958/attachments/1/translations/en/renditions/native

One may speak of ‘co-location' when:

• production offshoring or re-shoring is followed by R&D offshoring or re-shoring

and

• there is functional interdependency between production and R&D or innovation, of these business functions.

In order to explore the motives and explanations behind the geographical (co-)location decisions for R&D, innovation and manufacturing, 10 cases studies, spread over different countries and sectors, have been extensively analysed. Based on this case study analysis, we identified three typologies of co-location: (1) ‘no co-location': no functionally related production and R&D co-location; (2) ‘partial co-location': only partial functionally related production and R&D co-location; (3) ‘full co-location'.

The study identified a common set of emerging issues that deserve further (continued) policy attention:

1. Monitoring focused on particular groups of firms is important.
2. Europe needs to keep focusing on excellence, in terms of available knowledge, research infrastructure and human capital. 
3. In view of the key role that the market plays in offshoring and location investments, the achievement of the full potential of the European Single Market, through an improved and harmonised legislation is essential to allow companies to turn the Single market into a ‘local' one.

Additionally, we identified the need to prioritize the support of the creation of new markets through public procurement and lead market creation initiatives, especially there were Europe has a strong scientific and technological base and commercial deployment is required. Finally, the case study analysis confirmed the importance of strong incentive packages and the importance of coordination of government incentives between Member States and regions as well as on a larger international scale.