Working Paper: NBER ID: w22160
Authors: L. Kamran Bilir; Eduardo Morales
Abstract: How global are the gains from innovation? When firms operate production plants in multiple countries, technological improvements developed in one location may be shared with foreign sites for efficiency gain. We develop a model that accounts for such transfer, and apply it to measure private returns to R&D investment for a panel of U.S. multinationals during 1989-2008. Our estimates indicate that innovation increases performance at firm locations beyond the innovating site: the median U.S. multinational firm realizes abroad 20 percent of the return to its U.S. R&D investment, suggesting estimates based only on domestic operations understate multinationals' gain from innovation, and revealing a spatial disconnect between the costs and potential gains of policies that encourage multinationals' U.S. innovation.
Keywords: Innovation; Multinational Firms; R&D Investment; Productivity
JEL Codes: F00; F23; O30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| headquarters innovation (O36) | affiliate performance (M52) |
| eliminating the effect of parent R&D (O39) | affiliate performance (M52) |
| affiliate innovation (O36) | performance at other firm sites (L19) |