Innovation, Foreign Direct Investment and Growth
AbstractDirect foreign investment is incorporated in a dynamic general equilibrium model with endogenous technological change. In contrast to recent endogenous growth approaches, the author allows for geographical separation of the innovation and production of newly developed goods. Firms acquire specific knowledge through R&D investment in the more developed country and use their specific asset to establish a production plant in the low-cost country. Foreign direct investment is accompanied by interregional spillovers of knowledge from the more to the less advanced country. The author derives a steady-state equilibrium with active innovation and production activities in the high-technology sector in both countries. Furthermore, the implications of factor flow liberalization as well as of industrial policies are investigated. Copyright 1997 by The London School of Economics and Political Science
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 64 (1997)
Issue (Month): 253 (February)
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