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Globalization, R&D and the iPod Cycle

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Author Info

  • Sener, Fuat
  • Zhao, Laixun

Abstract

This paper constructs a dynamic scale-free North-South model of trade with endogenous innovation. In the North a local-sourcing-targeted race and an outsourcing-targeted R&D race take place simultaneously within each industry. The former results in the winner firm manufacturing in the North, while the latter culminates in the winner firm's immediate outsourcing to the South, generating the iPod cycle. We study three aspects of globalization: reductions in the resource-requirement in outsourcing-targeted R&D, increased subsidies to outsourced production, and reduced Southern imitation due to TRIPs. Each event boosts outsourcing-targeted R&D and increases the frequency of iPod cycles. The aggregate innovation rate rises despite a possible fall in local-sourcing-targeted R&D, and the North-South relative wage decreases.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 77 (2009)
Issue (Month): 1 (February)
Pages: 101-108

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Handle: RePEc:eee:inecon:v:77:y:2009:i:1:p:101-108

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: Outsourcing Innovation Product cycle Endogenous growth;

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Cited by:
  1. Nuttapon Photchanaprasert, 2011. "Innovation and Production Offshoring: Implications on Welfare," Global COE Hi-Stat Discussion Paper Series gd10-185, Institute of Economic Research, Hitotsubashi University.

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