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Innovation in Tow: R&D FDI and investment incentives

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  • Wellhausen, Rachel L.

Abstract

Multinational corporations (MNCs) increasingly internationalize research and development (R&D), but the distribution of foreign direct investment (FDI) in R&D differs from that of general FDI. I use data on US MNC affiliates’ investments abroad (2001–2008) to demonstrate that increasing value added predicts more future R&D FDI, as R&D FDI is an upgrade decision. I then use data on R&D investment incentives to show that, while governments spend resources on R&D incentives, these can be negative predictors of R&D FDI. The findings imply that government efforts are best directed at incremental encouragement of value-added activities, as efforts to jump to R&D FDI are misguided.

Suggested Citation

  • Wellhausen, Rachel L., 2013. "Innovation in Tow: R&D FDI and investment incentives," Business and Politics, Cambridge University Press, vol. 15(4), pages 467-491, December.
    • Handle: RePEc:cup:buspol:v:15:y:2013:i:04:p:467-491_00
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    Cited by:

    1. Leslie Johns & Rachel L. Wellhausen, 2021. "The price of doing business: Why replaceable foreign firms get worse government treatment," Economics and Politics, Wiley Blackwell, vol. 33(2), pages 209-243, July.
    2. Stek, Pieter E. & van Geenhuizen, Marina S., 2016. "The influence of international research interaction on national innovation performance: A bibliometric approach," Technological Forecasting and Social Change, Elsevier, vol. 110(C), pages 61-70.
    3. Rakesh Basant, 2018. "Exploring Linkages between Industrial Innovation and Public Policy: Challenges and Opportunities," Vikalpa: The Journal for Decision Makers, , vol. 43(2), pages 61-76, June.

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