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Globalization and Innovation in Emerging Markets

  • Yuriy Gorodnichenko
  • Jan Svejnar
  • Katherine Terrell

Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data from 27 emerging market economies, we estimate the effects of foreign competition and linkages with foreign firms on innovation by domestic firms. We provide robust evidence of a positive relationship between foreign competition and innovation, broadly defined. The supply chain of multinational enterprises and trade are also important channels. There is no evidence for an inverted U relationship between innovation and foreign competition. Moreover, the relationship between globalization and innovation does not differ across the manufacturing and service sectors. (JEL F02, F23, M16, O33)

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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 2 (2010)
Issue (Month): 2 (April)
Pages: 194-226

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Handle: RePEc:aea:aejmac:v:2:y:2010:i:2:p:194-226
Note: DOI: 10.1257/mac.2.2.194
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