Southern Innovation and Backward Knowledge Spillovers: A Dynamic FDI Model
We develop a model in which the proportion of Northern firms choosing to become multinationals is endogenous. In the benchmark model, Northern firms engage in innovation based on the local knowledge stock and learning-by-doing (LBD), and a share of these products is transferred to Southern production via FDI. An increase in Southern imitation limits the multinationalization rate. We extend the model to permit Southern innovation based on the amount of local knowledge and LBD. Because Southern firms have higher innovation costs, this generates inefficient specialization in both regions and reduces global growth. However, it generates a U-shaped relationship between FDI and local imitation. We also allow for “backward” spillovers in knowledge to Northern innovation, which partially restores global efficiency and growth. We find that Southern R&D investments follow an inverse U-shape as imitation risk rises. A fall in fixed FDI setup costs or a rise in the LBD spillover in either region raises innovation growth.
|Date of creation:||Jun 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +45 6550 2233
Fax: +45 6550 1090
Web page: http://degit.sam.sdu.dk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R Cooper & Alok Johri, 2000.
"Learning by Doing and Aggregate Fluctuations,"
Department of Economics Working Papers
2000-02, McMaster University.
- Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
- Glass, Amy Jocelyn & Saggi, Kamal, 2002. "Intellectual property rights and foreign direct investment," Journal of International Economics, Elsevier, vol. 56(2), pages 387-410, March.
When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c014_001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Pedersen)
If references are entirely missing, you can add them using this form.