Quality-Improving R&D, Trade Barriers, and Foreign Direct Investment
AbstractThis investigation pits Cournot oligopolists against each other in a model of quality and R&D choice. A firm gains a strategic advantage over its rival when it is able to sell in more countries due to the jointness of quality improvements across production locations. Trade barriers that restrict access to a market put the restricted firm at a disadvantage, the degree of disadvantage being stronger under a quota than under a tariff. Given that FDI (foreign direct investment) depends on this disadvantage, quotas present a stronger incentive to undertake FDI than a tariff. Also, in this model it is never possible for a quota to lead to quality upgrading of imports due to the associated disadvantage of the importing firm in quality-improving R&D.
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Bibliographic InfoPaper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 199712.
Length: 33 pages
Date of creation: 1997
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Note: Rough draft--please do not cite without permission from the author.
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Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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