SOTA Review

How Can We Attract and Retain More Internationally-mobile R&D? SOTA No 3

As the world becomes ‘flatter’ and firms have more locations available in which to site their activities, more and more locations are chasing the ‘holy grail’ of attracting high-tech activity, and particularly R&D. This is, however, often in the absence of a clear strategy of how to retain this investment once it has landed, and how to best encourage interactions between internationally mobile capital to maximise the benefits of that investment for a region. This review explores the empirical literature on the location of R&D and other high- tech or innovation-intensive activities and explores the main findings of this in the context of local economic development or inward investment strategies.

It is important to consider the nature of local labour markets in this context. Attracting high-tech investments often requires a degree of migration into a region. Firms recognise that in these activities they are engaged in a ‘war for talent’ such that earnings growth in these sectors far outstrip more general wage increases. As such, firms need to be convinced that in addition to the pool of labour already in a given location, more can be attracted from elsewhere. This issue is however somewhat at odds with the existing evidence, which focuses on financial incentives or tax policy as the means to attract such investments.

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