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Thinking Inside the Box: Policies Towards Footloose R&D Intensive Firms

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  • Gerda Dewit

    (Department of Economics, Finance and Accounting, Maynooth University.)

  • Dermot Leahy

    (Department of Economics, Finance and Accounting, Maynooth University.)

Abstract

We develop a model with a large R&D-intensive home ?rm that must decide whether to locate production domestically or to o¤shore it. Poli- cymakers have an interest in the ?rm?s pro?ts, the local external bene?ts generated by the ?rm?s R&D and the employment provided by the do- mestic production facility. We demonstrate that attempts to boost the ?rm?s R&D can encourage the ?rm to o¤shore its production. Hence, we highlight a possible con?ict between two policy objectives: encouraging local R&D and discouraging the o¤shoring of production. In addition, if the government is concerned about the employment large domestic ?rms create, its R&D policy could potentially harm future productivity growth.

Suggested Citation

  • Gerda Dewit & Dermot Leahy, 2017. "Thinking Inside the Box: Policies Towards Footloose R&D Intensive Firms," Economics Department Working Paper Series n285-17.pdf, Department of Economics, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n285-17.pdf
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    References listed on IDEAS

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