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The Gravity of R&D FDIs

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  • Davide Castellani

    ()
    (Department of Economics, Finance and Statistics, Università di Perugia)

  • Alfredo Jimenez Palmero

    ()
    (Department of Economics and Business Administration, University of Burgos, Spain)

  • Antonello Zanfei

    ()
    (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")

Abstract

The negative effect of distance is justified by the existence of transport costs which hamper the international exchange of final and intermediate goods, and by higher uncertainty about local markets. We submit that distance plays a remarkably different role in the case of R&D FDIs since they mainly involve the international transfer, absorption and use of knowledge. Using data on bilateral investment projects in R&D, manufacturing and other business activities between 58 countries, we find that geographic distance does not hinder R&D FDIs as much as in the case of production and other investment activities. Furthermore, once we control for institutional and psychic distance, in particular language and religious differences, the negative effect of geographic distance vanishes.

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File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_11_06.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 1106.

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Length: 31 pages
Date of creation: 2011
Date of revision: 2011
Handle: RePEc:urb:wpaper:11_06

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Web page: http://www.econ.uniurb.it/
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Related research

Keywords: Multinational Firms; International Business; Technological Change; Choices and Consequences; Diffusion Processes.;

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  1. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
  2. von Zedtwitz, Maximilian & Gassmann, Oliver, 2002. "Market versus technology drive in R&D internationalization: four different patterns of managing research and development," Research Policy, Elsevier, vol. 31(4), pages 569-588, May.
  3. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2002. "Estimating The Knowledge-Capital Model of the Multinational Enterprise: Comment," University of Oregon Economics Department Working Papers 2002-13, University of Oregon Economics Department, revised 01 Mar 2002.
  4. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
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