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Location of R&D and High-Tech Production by Vertically Integrated Multinationals

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  • Karolina Ekholm
  • Katariina Hakkala

Abstract

This article extends the theory of multinational firms by allowing for agglomeration forces in firm-level activities such as R&D as well as in production. We develop a two-country general-equilibrium model where firms make separate choices about the location of R&D and production. There are R&D spillovers and a home-market effect creating incentives for firms to locate production in the relatively large market. For relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialise in R&D. While skilled labour may gain from hosting an agglomeration of R&D activities, unskilled labour Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 518 (03)
Pages: 512-543

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:518:p:512-543

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Cited by:
  1. Tingvall, Patrik & Karpaty, Patrik, 2011. "Offshoring and Home Country R&D," Ratio Working Papers 180, The Ratio Institute.
  2. Roger Bandick & Holger Görg & Patrik Karpaty, 2010. "Foreign acquisitions, domestic multinationals, and R&D," Kiel Working Papers 1651, Kiel Institute for the World Economy.
  3. Rachel Griffith & Gareth Macartney, 2010. "Employment protection legislation, multinational firms and innovation," IFS Working Papers W10/01, Institute for Fiscal Studies.

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