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Heterogeneity in the Internationalization of R&D: Implications for anomalies in finance and macroeconomics

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  • Grüning, Patrick

Abstract

Empirical evidence suggests that investments in research and development (R&D) by older and larger firms are more spread out internationally than R&D investments by younger and smaller firms. In this paper, I explore the quantitative implications of this type of heterogeneity by assuming that incumbents, i.e. current monopolists engaging in incremental innovation, have a higher degree of internationalization in their R&D technologies than entrants, i.e. new firms engaging in radical innovation, in a two-country endogenous growth general equilibrium model. In particular, this assumption allows the model to break the perfect correlation between incumbents' and entrants' innovation probabilities and to match the empirical counterpart exactly.

Suggested Citation

  • Grüning, Patrick, 2017. "Heterogeneity in the Internationalization of R&D: Implications for anomalies in finance and macroeconomics," SAFE Working Paper Series 185, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  • Handle: RePEc:zbw:safewp:185
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    References listed on IDEAS

    as
    1. Andrea Fernández-Ribas, 2010. "International Patent Strategies of Small and Large Firms: An Empirical Study of Nanotechnology," Review of Policy Research, Policy Studies Organization, vol. 27(4), pages 457-473, July.
    2. Harald Uhlig, 2007. "Explaining Asset Prices with External Habits and Wage Rigidities in a DSGE Model," American Economic Review, American Economic Association, vol. 97(2), pages 239-243, May.
    3. Backus, David K. & Smith, Gregor W., 1993. "Consumption and real exchange rates in dynamic economies with non-traded goods," Journal of International Economics, Elsevier, vol. 35(3-4), pages 297-316, November.
    4. Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2012. "Innovation and Foreign Ownership," American Economic Review, American Economic Association, vol. 102(7), pages 3594-3627, December.
    5. Santacreu, Ana Maria, 2015. "Innovation, diffusion, and trade: Theory and measurement," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 1-20.
    6. Elhanan Helpman & David T. Coe & Willy W. Hoffmaister, 1994. "North-South RandD Spillovers," IMF Working Papers 94/144, International Monetary Fund.
    7. Gavazzoni, Federico & Santacreu, Ana Maria, 2015. "International R&D Spillovers and Asset Prices," Working Papers 2015-41, Federal Reserve Bank of St. Louis.
    8. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
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    More about this item

    Keywords

    Heterogeneous innovation; Technology spillover; Endogenous growth; Creative destruction; International finance;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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