Working Paper: CEPR ID: DP5060
Authors: Rene Belderbos; Elissavet Lykogianni; Reinhilde Veugelers
Abstract: We analyse strategic interaction in R&D internationalization decisions by two multinational firms competing both abroad and in their home markets and examine different incentives for foreign R&D faced by technology leaders and technology laggards. The model takes into account the impact of local inter-firm R&D spillovers, (non-costless) international intra-firm transfer of knowledge, and the notion that internal R&D increases the effectiveness of incoming spillovers. Greater efficiency of intra-firm transfers and greater spillovers increases the attractiveness of home R&D to the technology leader. The lagging firm in contrast increases the share of foreign R&D as overseas technology sourcing becomes more effective. Greater product market competition encourages the leading firm to engage in foreign R&D to capture a larger share of profits on the foreign market, while laggards concentrate more R&D at home to defend their home market position. The country with a stricter intellectual property rights regime attracts a larger share of R&D by both leader and laggard.
Keywords: MNEs; R&D; R&D spillovers
JEL Codes: D21; F23; L16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Product market competition (L13) | R&D localization decisions of technology leaders (O36) |
| Product market competition (L13) | R&D localization decisions of laggards (L15) |
| Intra-firm knowledge transfer efficiency (O36) | R&D localization decisions of technology leaders (O36) |
| Intra-firm knowledge transfer efficiency (O36) | R&D localization decisions of laggards (L15) |
| External spillovers (F69) | R&D localization decisions of technology leaders (O36) |
| External spillovers (F69) | R&D localization decisions of laggards (L15) |