Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing, and Competition
University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation; UNU-MERIT; Maastricht University
Catholic University of Leuven (KUL) - Department of Economics
Catholic University of Leuven (KUL) - Department of Applied Economics; Centre for Economic Policy Research (CEPR)
We analyze 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 shares of R&D by both leader and laggard.
Number of Pages in PDF File: 38
Keywords: MNEs, R&D, R&D spillovers
JEL Classification: D21, F23, L16working papers series
Date posted: January 23, 2006
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