| Acknowledgement | 5 |
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| Table of Contents | 6 |
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| CHAPTER I. Introduction and Main Policy Lessons | 11 |
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| CHAPTER II. Concepts and Theory | 16 |
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| 1 Introduction | 16 |
| 1.1 Basic Developments | 16 |
| 1.2 Network Dynamics | 22 |
| 1.3 Conceptual Approach | 23 |
| 1.4 ICT Market Dynamics, Outsourcing and Offshoring | 33 |
| 2 Interdependencies Between ICT, Growth and Internationalisation | 44 |
| 2.1 ICT and Growth | 44 |
| 2.2 Growth, Competitiveness and Outsourcing Dynamics | 50 |
| 2.3 A Closer Look on Digital Goods and IT Services | 55 |
| 2.4 International Outsourcing of ICT, Innovation and Foreign Direct Investment | 64 |
| 2.5 ICT Product Cycle | 71 |
| 3 Theoretical Perspectives on Internationalisation | 74 |
| 3.1 Standard Theoretical Perspectives on ICT Goods and ICT Services | 74 |
| 3.2 Management Theories | 76 |
| 3.3 Macroeconomic Theories on Internationalisation | 81 |
| 4 Conclusions | 87 |
| 4.1 Perspectives on ICT Market Dynamics | 87 |
| 4.2 Dynamics of Internationalisation | 91 |
| CHAPTER III. Empirical Analysis of the Competitive Trade Position | 94 |
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| 1 Introduction | 94 |
| 2 Size and Developments of European ICT Activities | 95 |
| 2.1 A Bird’s Eye View of European Trade in Goods and Services | 96 |
| 2.2 EU25’s Trade in ICT Goods and Services | 98 |
| 2.3 EU25 Trade in ICT Goods: Quality and Price Competition | 102 |
| 2.4 EU25 Trade in ICT Goods with the Rest of the World | 102 |
| 2.5 International Trade in ICT and Other Services | 109 |
| 2.6 EU25’s Trade Position in ICT Activities | 114 |
| 3 Selected Characteristics of ICT Activities | 115 |
| 3.1 Market Shares and Trends in the International Trade in ICT Goods10 | 115 |
| 3.2 Revealed Comparative Advantage in ICT Goods and Services | 117 |
| 3.3 Value Added | 121 |
| 3.4 Quality of Labour and Value Added | 123 |
| 3.5 Level and Growth of Labour Productivity | 125 |
| 3.6 Unit Values, Revealed Comparative Advantages and Price and Quality Competition | 130 |
| 4 Other Developments in the Trade ICT Goods and Services During 1996-2004 | 135 |
| 4.1 What Has Happened to the Trade in ICT Goods? | 137 |
| 4.2 Stagnation of Inter EU25 Trade in ICT Goods Despite Enlargement | 139 |
| 4.3 What Has Happened to the Trade in ICT Services? | 139 |
| 5 Conclusions | 140 |
| CHAPTER IV. Trends in Foreign Direct Investment | 142 |
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| 2 Outward FDI Stocks | 144 |
| 2.1 Office, Accounting | 144 |
| 144 | 144 |
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| 2.2 Radio and Television | 144 |
| 145 | 144 |
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| 2.3 Telecommunications (ISIC 6420) | 145 |
| 2.4 Computer | 145 |
| 148 | 145 |
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| 2.5 Research and Development (ISIC 73) | 149 |
| 2.6 Business Services n.e.c. (ISIC 74) | 151 |
| 2.7 Effects Explaining Outward FDI-to-Value-Added-Ratios | 152 |
| 3 Inward FDI Stocks | 155 |
| 3.1 Office, Accounting | 155 |
| 155 | 155 |
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| 3.2 Radio and Television | 155 |
| 157 | 155 |
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| 3.3 Telecommunications (ISIC 6420) | 158 |
| 3.4 Computer | 158 |
| 158 | 158 |
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| 3.5 Research and Development (ISIC 73) | 159 |
| 3.6 Business Services n.e.c. (ISIC 74) | 160 |
| 3.7 Effects explaining Inward FDI-to-Value-Added-Ratios | 161 |
| CHAPTER V. Internationalisation of R | 161 |
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| 167 | 161 |
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| 1 Introduction | 167 |
| 2 R | 167 |
| 167 | 167 |
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| 2.1 Home Base Exploiting Strategies | 168 |
| 2.2 Home Base Augmenting Strategies | 169 |
| 2.3 Extensions of the Basic Dichotomy | 171 |
| 3 Empirical Analysis | 174 |
| 3.1 Data and Methods | 174 |
| 3.2 Trends at the Country and Technology Level | 179 |
| 3.3 Internationalisation in ICT Patenting at the Company Level | 182 |
| 3.4 Technological Specialisation at Home and Abroad | 187 |
| 3.5 Recent Developments in the Internationalisation of R | 187 |
| 189 | 187 |
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| 4 Main Findings and Conclusions | 195 |
| CHAPTER VI. From Case Studies: International Division of Labour Within ICT Companies | 196 |
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| 1 Business Case Studies, Objective and Methodology | 196 |
| 2 Analysis on ICT Sub-Sectors of: Software, Hardware and Services | 200 |
| 2.1 Software Companies | 200 |
| 2.2 ICT Hardware Companies | 202 |
| 2.3 ICT Services Companies | 203 |
| 3 Motives and Models of Internationalisation | 204 |
| 4 International Division of ICT Business Functions, the Place of EU | 208 |
| CHAPTER VII. Policy Analysis and Policy Conclusions | 210 |
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| 1 Introduction | 210 |
| 2 Effects of Internationalisation | 211 |
| 2.1 Effects of ICT Internationalisation on the Target Country | 212 |
| 2.2 Effects of ICT Internationalisation on the Home Country | 213 |
| 2.3 Differentiation of Effects by ICT Segments | 214 |
| 3 Implications for Policy | 216 |
| 3.1 Key Findings on the Internationalisation of ICT | 216 |
| 3.2 Policy Conclusions | 219 |
| 4 Final Remarks | 226 |
| References | 227 |
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| Appendix A.I Aspects of Internationalisation of Digital Goods Producers | 245 |
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| 1 Accompanying MNEs: A Theoretical Approach with IT Services Providers | 245 |
| 2 Management Decisions of Digital Companies | 253 |
| 3 Market Entry of Digital Good Producers in a General Equilibrium Model | 254 |
| 4 Comparing the Models for IT Services and Digital Goods Providers | 260 |
| Appendix A.II Additional Tables and Figures - Chapter II | 262 |
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| Appendix B Data Issues Related to Chapter III | 272 |
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| Appendix C Detailed Regression Results - Chapter IV | 276 |
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| Appendix D - Chapter V<
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