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Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing and Competition

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  • Belderbos, Rene
  • Lykogianni, Elissavet
  • Veugelers, Reinhilde

Abstract

We analyse strategic interaction in R&D internationalization decisions by two multinational firms competing both abroad and in their home markets and examine different incentives for foreign R&D faced by technology leaders and technology laggards. The model takes into account the impact of local inter-firm R&D spillovers, (non-costless) international intra-firm transfer of knowledge, and the notion that internal R&D increases the effectiveness of incoming spillovers. Greater efficiency of intra-firm transfers and greater spillovers increases the attractiveness of home R&D to the technology leader. The lagging firm in contrast increases the share of foreign R&D as overseas technology sourcing becomes more effective. Greater product market competition encourages the leading firm to engage in foreign R&D to capture a larger share of profits on the foreign market, while laggards concentrate more R&D at home to defend their home market position. The country with a stricter intellectual property rights regime attracts a larger share of R&D by both leader and laggard.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5060.

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Date of creation: May 2005
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Handle: RePEc:cpr:ceprdp:5060

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Keywords: MNEs; R&D; R&D spillovers;

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Citations

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Cited by:
  1. Carlo Altomonte & Enrico Pennings, 2005. "Testing for Marginal Spillovers from Foreign Direct Investment," Tinbergen Institute Discussion Papers 05-101/4, Tinbergen Institute.
  2. Hall, Bronwyn H., 2011. "The internationalization of R&D," MERIT Working Papers 049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Bárcena Ruiz, Juan Carlos & Garzón San Felipe, María Begoña, 2011. "Relocation and Investment in R&D by Firms," IKERLANAK 2011-52, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  4. Kashefi, Mohammad Ali, 2011. "The effect of vertical knowledge spillovers via the supply chain on location decision of firms," MPRA Paper 31743, University Library of Munich, Germany, revised 20 May 2011.
  5. Sandro Montresor & Antonio Vezzani, 2014. "On the R&D giants' shoulders: Do FDI help to stand on them?," JRC-IPTS Working Papers on Corporate R&D and Innovation 2014-01, Institute of Prospective Technological Studies, Joint Research Centre.
  6. Alessia Pisoni & Alberto Onetti & Luciano Fratocchi & Marco Talaia, 2010. "Managing R&D activities in the Italian red biotech industry. A comparison between Italian independent firms and multinational companies," Economics and Quantitative Methods, Department of Economics, University of Insubria qf1003, Department of Economics, University of Insubria.
  7. René Belderbos & Elissavet Lykogianni & Reinhilde Veugelers, 2008. "Strategic R&D Location in European Manufacturing Industries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 144(2), pages 183-206, July.
  8. René Belderbos, 2006. "R&D Activities in East Asia by Japanese, European, and US Multinationals," Microeconomics Working Papers 21887, East Asian Bureau of Economic Research.
  9. Hodaka Morita & Xuan Nguyen, 2012. "FDI and Technology Spillovers under Vertical Product Di erentiation," Discussion Papers, School of Economics, The University of New South Wales 2012-19, School of Economics, The University of New South Wales.

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