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Location factors of international R&D activities: an econometric approach

Listed author(s):
  • Hugo Erken
  • Marcel Kleijn
Registered author(s):

    Research and development (R&D) is important for economic growth. Many countries therefore attempt to raise the investments in R&D. Increasingly important in this context are foreign direct investments in R&D, which on average constitute 24% of total business R&D investments in the EU15 (between 1995 and 2004). This paper focuses on the question: 'Which location factors are decisive for the attractiveness of foreign R&D investments?' The answer to this question is crucial in order to attract new foreign investments in R&D and to keep home-base R&D activities in a country or to expand them. Based on econometric analysis, we show in this paper that, besides the impact of human capital and value added of foreign affiliates, a country's stock of private R&D capital is an important location factor for international R&D activities. The interpretation of this result is twofold. First of all, it indicates that firms locate their R&D abroad to reap the benefits of knowledge-spillover effects. Secondly, we argue that the stock of private R&D capital embodies a so-called 'place-to-be effect'. This effect can be regarded as a signalling effect to firms: if the private R&D capital stock in a country is relatively large, framework conditions for research are in place and the innovative climate is likely to be excellent.

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    Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

    Volume (Year): 19 (2010)
    Issue (Month): 3 ()
    Pages: 203-232

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    Handle: RePEc:taf:ecinnt:v:19:y:2010:i:3:p:203-232
    DOI: 10.1080/10438590802469578
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