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The global location of R&D centres by MNCs is a rather new phenomenon; especially when it comes to establishing R&D centres in developing countries. The existing and rather limited literature on globalization of innovation provides four possible explanations of why multinationals locate R&D departments in developing countries: reduce research costs, access large markets, tap into a large pool of qualified human resources or benefit from knowledge spillovers available in the local/regional system of innovation. The empirical research presented in this paper reveals that none of these arguments can fully explain the increasing location of R&D departments in China.
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