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

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  • Ekholm, Karolina
  • Hakkala, Katariina

Abstract

We develop a two-country general equilibrium model where firms make separate choices about the location of R&D and high-tech production. There are two agglomeration forces: R&D spillovers and backward linkages associated with high-tech production. The latter tends to attract production to the larger economy. We show that, for relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialize in R&D. For certain parameterizations, both concentration and dispersion of R&D activities are possible outcomes. Hosting an agglomeration of R&D activities does not necessarily lead to welfare gains.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4078.

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Date of creation: Oct 2003
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Handle: RePEc:cpr:ceprdp:4078

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Keywords: agglomeration economies; high-tech production; monopolistic competition; R&D;

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Citations

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Cited by:
  1. Bandick, Roger & Görg, Holger & Karpaty, Patrik, 2010. "Foreign acquisitions, domestic multinationals, and R&D," Working Papers 10-11, University of Aarhus, Aarhus School of Business, Department of Economics.
  2. Karpaty, Patrik & Tingvall, Patrik Gustavsson, 2011. "Offshoring and Home Country R&D," Working Paper Series in Economics and Institutions of Innovation 254, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  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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