This paper provides the first empirical attempt of linking firms’ profits and investment in R&D revisiting Knight’s (Risk, uncertainty and profit, Hart, Schaffner & Marx, Boston, 1921) distinction between uncertainty and risk. Along with the risky profit-maximising scenario, identifying a second, off-setting, unpredictable bias that leads to heterogeneous returns to R&D investments is crucial to fully understand the drivers of corporate profits. Consistently with the Knightian theory that relates risk to profitability, we model the impact of risk and uncertainty on profits and provide a first empirical attempt to model the effect of ambiguity, a particular type of uncertainty, on R&D returns.

The globalization of R&D activities has continued its growth path as companies are increasingly trying to capture knowledge and market opportunities internationally. The rapid evolution of national economies and the ways to conduct knowledge-intensive businesses has led researchers and analysts to pursue a deeper understanding of the globalization of corporate R&D and the related driving factors and impacts. This introductory chapter provides an update of trends in the globalization of corporate R&D. It reviews the literature on the main drivers and impacts of the process under investigation, introduces the papers for this special section, and offers some concluding remarks.

The unprecedented growth in foreign direct investment in the last few decades has caused drastic changes in the labor markets of the host countries. The major part of FDI takes place in low-tech industries, where the wages and skills are low, or in high-tech, where they offer a wage premium for the highly skilled workers. This mechanism may increase the polarization of employment into high-wage and low-wage jobs, at the expense of middle-skill jobs. This paper looks at the effects of two types of FDI inflows, namely foreign investment in high-skill and low-skill activities, on job polarization. We match data on greenfield FDI aggregated by country and sector with data on employment by occupational skill to investigate the extent to which different types of greenfield FDI are responsible for skill polarization. Our results show that low-skill foreign investment shifts employment from high- to medium- and low-skill jobs, while skill-intensive FDI generally leads to skill upgrading. Only FDI in information and communication technology (ICT) is associated with job polarization, but only when accounting for the plurality of job polarization patterns across European sectors.

This paper investigates the structural change of the major economies through the lens of the leading global corporate R&D investors. Moreover, we explore the relationship between R&D intensity, capital intensity and profitability and R&D investment growth for young and old firms. Contrary to common understanding, our results show that in the EU the R&D distribution between sectors has changed – similar to the USA; however, the USA has experienced a very strong shift towards ICT-related sectors, which makes its change more visible. Both the EU and the USA have experienced a slower pace of structural change than emerging economies. Our results also indicate that capital and R&D intensity may have a complementary effect on long-term R&D performance, which can vary according to a firm’s age. The specific nature of the sample allows us to link our results to the Schumpeterian waves of innovation and the changes of techno-economic paradigms rather than alternative interpretation of management literature. Policy implications are discussed accordingly.

The paper investigates how would sector composition and the magnitude of R&D investments in the EU differ in year 2020 compared to the past, if a s