Drivers of International R&D to Asian Economies - Axel Mangelsdorf 2 and Anja Schmiele 1 1 Centre for European Economic Research 2 Berlin University of Technology Abstract: This paper aims to examine the incentives of companies from industrialized coun- tries to conduct R&D in developing Asian economies. By analyzing the relation- ship between previous international R&D activities in Asia and the sales of inno- vative products in Asia, we investigate whether companies follow ‘knowledge augmenting’ or ‘knowledge exploiting’ strategies. Since our results show a posi- tive relationship between these activities only in developing Asia, we conclude that those firms follow a knowledge exploiting strategy and are attracted by mar- ket opportunities. Further, we find that companies require a certain experience before they conduct R&D activities in Asia. The more R&D units a company has outside its home market, the more likely the company is to locate a R&D unit in Asia. However, going to Asia is not just a phenomenon of large multinational companies. The analysis is based on a dataset about the innovation behaviour of German firms, the Mannheim Innovation Panel. We retrieve a sample of about 739 international innovating firms.