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Globalization and strategic research investments

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  • Bohnstedt, Anna
  • Schwarz, Christian
  • Suedekum, Jens

Abstract

We develop a general equilibrium model of international trade with heterogeneous firms, where countries can invest into basic research to improve their technological potential. These research investments tighten firm selection and raise the average productivity of firms in the market, thereby implying lower consumer prices and higher welfare. In an open economy there is also a strategic investment motive, since a higher technological potential gives domestic firms a competitive advantage in trade. Countries tend to over-invest due to this strategic motive. There are thus welfare gains from coordinating research investments. The over-investment problem turns to an under-investment problem if there are sufficiently strong cross-country spillovers of basic research investments.

Suggested Citation

  • Bohnstedt, Anna & Schwarz, Christian & Suedekum, Jens, 2012. "Globalization and strategic research investments," Research Policy, Elsevier, vol. 41(1), pages 13-23.
  • Handle: RePEc:eee:respol:v:41:y:2012:i:1:p:13-23
    DOI: 10.1016/j.respol.2011.05.028
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    References listed on IDEAS

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    Cited by:

    1. Philipp J. H. Schröder & Allan Sørensen, 2014. "A Welfare Ranking of Multilateral Reductions in Real and Tariff Trade Barriers when Firms are Heterogenous," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 423-443, August.
    2. Su, Hsin-Ning, 2017. "Collaborative and Legal Dynamics of International R&D- Evolving Patterns in East Asia," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 217-227.
    3. Anna Bohnstedt, 2016. "Spillovers from Foreign Exporters," Review of International Economics, Wiley Blackwell, vol. 24(1), pages 150-170, February.
    4. Michael Pflüger & Stephan Russek, 2013. "Business Conditions and Exit Risks Across Countries," Open Economies Review, Springer, vol. 24(5), pages 963-976, November.
    5. Stefano Bresciani & Alberto Ferraris & Manlio Del Giudice, 2016. "R&D internationalization in asian developing countries: evidence from european multinationals," MERCATI E COMPETITIVITÀ, FrancoAngeli Editore, vol. 2016(3), pages 25-44.
    6. repec:gam:jsusta:v:9:y:2017:i:4:p:541-:d:94915 is not listed on IDEAS

    More about this item

    Keywords

    Public research investments; Public R&D; International trade; Heterogeneous firms; Basic research; Strategic trade policy;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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