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Location of R&D and High-Tech Production by Vertically Integrated Multinationals

  • Karolina Ekholm
  • Katariina Hakkala

This article extends the theory of multinational firms by allowing for agglomeration forces in firm-level activities such as R&D as well as in production. We develop a two-country general-equilibrium model where firms make separate choices about the location of R&D and production. There are R&D spillovers and a home-market effect creating incentives for firms to locate production in the relatively large market. For relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialise in R&D. While skilled labour may gain from hosting an agglomeration of R&D activities, unskilled labour Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 518 (03)
Pages: 512-543

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:518:p:512-543
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