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R&D and foreign direct investment with asymmetric spillovers

Listed author(s):
  • Maria Luisa Petit
  • Francesca Sanna-Randaccio
  • Roberta Sestini

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.

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File URL: http://hdl.handle.net/10.1080/10438599.2011.561994
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Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 21 (2012)
Issue (Month): 2 (October)
Pages: 125-150

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Handle: RePEc:taf:ecinnt:v:21:y:2012:i:2:p:125-150
DOI: 10.1080/10438599.2011.561994
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