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Tax Policy and the Globalisation of R&D

  • Russell Thomson

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This paper examines the factors influencing the globalisation of R&D, with a particular focus on the role of tax policy, using panel data for 25 OECD countries over the period 1980- 2005. Two measures of R&D internationalisation are considered - R&D directly financed from abroad and R&D expenditure by foreign affiliates of US MNEs. The econometric analysis, which appropriately control for other determinants of inter-country differences in R&D investment, finds no evidence that host country R&D tax policy is an important determinant of MNE R&D location decisions or in attracting additional cross-border contract R&D. There is evidence that affiliate fixed capital stock and total sales are strong determinants of R&D performed by affiliates of US MNEs. Controlling for these variables, host country attributes seemed to be less important. In the case of cross-border contract R&D, host country expenditure on R&D via institutions of higher education is also found to be important.

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File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2009/wp_econ_2009_03.pdf
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Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2009-03.

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Length: 74 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:pas:papers:2009-03
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  1. Martin Feldstein & James R. Hines Jr. & R. Glenn Hubbard, 1995. "The Effects of Taxation on Multinational Corporations," NBER Books, National Bureau of Economic Research, Inc, number feld95-2, December.
  2. Prema-chandra Athukorala & Archanun Kohpaiboon, 2006. "Multinational Enterprises and Globalization of R&D: A Study of U.S-based Firms," Departmental Working Papers 2006-06, The Australian National University, Arndt-Corden Department of Economics.
  3. Kumar, Nagesh, 1996. "Intellectual property protection, market orientation and location of overseas R&D activities by multinational enterprises," World Development, Elsevier, vol. 24(4), pages 673-688, April.
  4. Lall, Sanjaya, 1979. "The International Allocation of Research Activity by US Multinationals," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 313-31, November.
  5. Russell Thomson, 2009. "Tax Policy and the Globalisation of R&D," Departmental Working Papers 2009-03, The Australian National University, Arndt-Corden Department of Economics.
  6. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
  7. Lee G Branstetter & Raymond Fisman & C. Fritz Foley, 2006. "Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U. S. Firm-Level Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 321-349, 02.
  8. Walter G. Park & Juan Carlos Ginarte, 1997. "Intellectual Property Rights And Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 15(3), pages 51-61, 07.
  9. Helmut Gassler & Brigitte Nones, 2008. "Internationalisation of R&D and embeddedness: the case of Austria," The Journal of Technology Transfer, Springer, vol. 33(4), pages 407-421, August.
  10. Dunning, John H., 1994. "Multinational enterprises and the globalization of innovatory capacity," Research Policy, Elsevier, vol. 23(1), pages 67-88, January.
  11. Cantwell, John, 1995. "The Globalisation of Technology: What Remains of the Product Cycle Model?," Cambridge Journal of Economics, Oxford University Press, vol. 19(1), pages 155-74, February.
  12. Kumar, Nagesh, 2001. "Determinants of location of overseas R&D activity of multinational enterprises: the case of US and Japanese corporations1," Research Policy, Elsevier, vol. 30(1), pages 159-174, January.
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