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From learning to partnership : multinational research and development cooperation in developing countries

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Author Info
Navaretti, Giorgio Barba
Carraro, Carlo

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Abstract

The authors analyze the determinants of interfirm agreements between industrial and developing countries for research and development (R&D) - that is, between firms with asymmetric endowments of knowledge. They develop a model in which a multinational has two options: a) setting up a subsidiary and competing with a local firm in a duopoly, or b) implementing an agreement and sharing monopoly profits. The two firms, if they chose the agreement, may also cooperate in R&D. The model shows that: a) the choice of cooperating in R&D is influenced by the intertemporal preferences of the developing country firm, the relative efficiency in R&D of the two firms, and the extent of knowledge spillovers; and b) the choice of cooperating R&D increases both the profitability and stability of the agreement. The empirical analysis is based on a data set of international arm's length agreements, part of which involve joint R&D. Testing the two-choice model supports some of the key theoretical results and assumptions. R&D agreements are particularly likely to emerge when firms are operating in knowledge-intensive industries, when the partners have a nonhierarchical contractual relationship, and when technological asymmetries between home and host countries exist but are not too great.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1662.

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Date of creation: 31 Oct 1996
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Handle: RePEc:wbk:wbrwps:1662

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Related research
Keywords: Economic Theory&Research; Agricultural Knowledge&Information Systems; Scientific Research&Science Parks; Environmental Economics&Policies; Small and Medium Size Enterprises; Economic Theory&Research; Environmental Economics&Policies; Scientific Research&Science Parks; Science Education; Agricultural Knowledge&Information Systems;

References listed on IDEAS
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  1. Bhattacharya, Sudipto & Glazer, Jacob & Sappington, David E. M., 1992. "Licensing and the sharing of knowledge in research joint ventures," Journal of Economic Theory, Elsevier, vol. 56(1), pages 43-69, February. [Downloadable!] (restricted)
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  2. Aghion, Philippe & Tirole, Jean, 1994. "Opening the black box of innovation," European Economic Review, Elsevier, vol. 38(3-4), pages 701-710, April. [Downloadable!] (restricted)
  3. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February. [Downloadable!] (restricted)
  4. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December. [Downloadable!] (restricted)
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