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R&D and foreign direct investment with asymmetric spillovers

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  • Maria Luisa Petit
  • Francesca Sanna-Randaccio
  • Roberta Sestini

Abstract

This paper analyzes how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, considering different sources of asymmetry such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We show that a better ability to manage knowledge flows incentivizes the firm to invest more in R&D. By introducing geographically bounded spillovers, we also find that one-way foreign direct investment (FDI) stimulates the multinational enterprise to raise its own R&D and that an FDI equilibrium is more likely to occur. Finally, spillovers localization leading to two-way FDI is welfare improving when compared with non-localized spillovers.

Suggested Citation

  • Maria Luisa Petit & Francesca Sanna-Randaccio & Roberta Sestini, 2012. "R&D and foreign direct investment with asymmetric spillovers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(2), pages 125-150, October.
  • Handle: RePEc:taf:ecinnt:v:21:y:2012:i:2:p:125-150
    DOI: 10.1080/10438599.2011.561994
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    References listed on IDEAS

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    1. Davide Castellani & Antonello Zanfei, 2006. "Multinational Firms, Innovation and Productivity," Books, Edward Elgar Publishing, number 3709.
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    Cited by:

    1. repec:kap:iaecre:v:19:y:2013:i:4:p:439-449 is not listed on IDEAS
    2. Jannett Highfill & Michael McAsey, 2013. "Welfare Measures in Dynamic Firm R&D Games," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(4), pages 439-449, November.
    3. Jannett Highfill & Michael McAsey, 2013. "Dynamic Firm R&D Games: Manufacturing Costs and Reliability Paths," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 1-14, February.

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