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Subsidizing Away Exports? A Note on R&D-policy towards Multinational Firms

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  • Norbäck, Pehr-Johan

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive firms to locate production abroad. Investigating firm-level data on Swedish MNEs, however, I find no evidence of such relocation. R&D subsidies rather tend to en courage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 832.

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Length: 29 pages
Date of creation: 19 May 2010
Date of revision:
Handle: RePEc:hhs:iuiwop:0832

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Keywords: Multinational Firms; R&D; Subsidies; Location; Empirical Analyses;

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  1. Sanna-Randaccio, Francesca, 2002. "The Impact of Foreign Direct Investment on Home and Host Countries with Endogenous R&D," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 278-98, May.
  2. Haaland, Jan I. & Kind, Hans Jarle, 2004. "R&D Policies, Trade and Process Innovation," CEPR Discussion Papers 4784, C.E.P.R. Discussion Papers.
  3. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier.
  4. Flam, Harry, 1994. "EC members fighting about surplus VERs, FDI and Japanese cars," Journal of International Economics, Elsevier, vol. 36(1-2), pages 117-131, February.
  5. Dermot Leahy & J. Neary, 2009. "Multilateral subsidy games," Economic Theory, Springer, vol. 41(1), pages 41-66, October.
  6. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 322-38, October.
  7. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
  8. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
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