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The impact of internationalization on innovation at countries’ level: the role of absorptive capacity

Author

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  • Andrea Filippetti
  • Marion Frenzm.frenz
  • Grazia Ietto-Gillies

Abstract

This paper analyses the impact of internationalization on the innovation performance of 40 countries. Internationalization variables are represented by outward and inward foreign direct investment, and by imports and exports; innovation is proxied with triadic patent applications. We take account of the influence of absorptive capacity—in both a linear and non-linear form—in the relationship between internationalization and innovation. Our results suggest that outward FDI is positively associated with patenting. Countries with high absorptive capacity benefit more, though there are diminishing returns. We find there is a negative association between inward FDI and patenting in countries with low absorptive capacity where FDI may displace local infant activities and stun further development of related local knowledge. We find support for the view that the innovation performance of countries with low absorptive capacity benefits from imports as well as from exports.

Suggested Citation

  • Andrea Filippetti & Marion Frenzm.frenz & Grazia Ietto-Gillies, 2017. "The impact of internationalization on innovation at countries’ level: the role of absorptive capacity," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(2), pages 413-439.
    • Handle: RePEc:oup:cambje:v:41:y:2017:i:2:p:413-439.
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    File URL: http://hdl.handle.net/10.1093/cje/bew032
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    More about this item

    Keywords

    Internationalization; Trade; Foreign direct investment; Innovation; Patents; Absorptive capacity;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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