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The returns to foreign R&D

Listed author(s):
  • René Belderbos

    (1] Department of Managerial Economics, Strategy and Innovation, University of Leuven, Leuven, Belgium[2] Department of Organization and Strategy, School of Business and Economics, University of Maastricht, Maastricht, The Netherlands[3] UNU-MERIT, Maastricht, The Netherlands)

  • Boris Lokshin

    (Department of Organization and Strategy, School of Business and Economics, University of Maastricht, Maastricht, The Netherlands)

  • Bert Sadowski

    (Eindhoven University of Technology, Eindhoven, The Netherlands)

Extant research on research and development (R&D) internationalization has not examined how effective foreign R&D investments are in generating positive returns for the investing firms, in particular in comparison and conjunction with the effects of domestic R&D investments. We examine the effectiveness of international knowledge sourcing through foreign R&D in an empirical analysis of the productivity effects of foreign and domestic R&D investments in a large panel of firms based in the Netherlands. We argue that foreign and domestic R&D will exhibit complementarity in their effects on productivity, but that the roles of domestic and foreign R&D depend on the relative position of the home country with respect to the global technology frontier and the related relative opportunities for knowledge sourcing abroad. We estimate a dynamic panel data model derived from a knowledge stock augmented production function framework allowing for productivity convergence and declining returns to R&D. We confirm that for firms active in industries in which the home country is behind the global technology frontier, foreign R&D provides positive returns and has a complementary relationship with domestic R&D. For industries at the global technology frontier, in contrast, domestic R&D is the primary source of productivity growth.

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Article provided by Palgrave Macmillan & Academy of International Business in its journal Journal of International Business Studies.

Volume (Year): 46 (2015)
Issue (Month): 4 (May)
Pages: 491-504

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Handle: RePEc:pal:jintbs:v:46:y:2015:i:4:p:491-504
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