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Globalization and innovation in emerging markets

  • Yuriy Gorodnichenko
  • Jan Svejnar
  • Katherine Terrell

Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data on firms in 27 emerging market economies, we estimate the effects of foreign competition, vertical linkages with foreign firms, and international trade on several types of innovation by domestic firms. Using instrumental variables and a battery of checks, we provide robust evidence of a positive relationship between foreign competition and innovation and show that the supply chain of multinational enterprises and international trade are also important channels. There is no evidence for an inverted U relationship between innovation and foreign competition. The relationship between globalization and innovation does not differ across the manufacturing and service sectors.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14481.

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Date of creation: Nov 2008
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Publication status: published as Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2010. "Globalization and Innovation in Emerging Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 194-226, April.
Handle: RePEc:nbr:nberwo:14481
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