Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing, and Competition

21 Pages Posted: 15 Aug 2008

See all articles by René Belderbos

René Belderbos

University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation; Maastricht University - Department of Organization & Strategy

Elissavet Lykogianni

affiliation not provided to SSRN

Reinhilde Veugelers

Catholic University of Leuven (KUL) - Department of Applied Economics; Centre for Economic Policy Research (CEPR)

Abstract

This paper develops a model of strategic interaction in R&D internationalization decisions between two multinational firms, competing both abroad and in their home markets. It examines different incentives for foreign R&D faced by a technology leader and a technology laggard. The model takes into account the impact of local inter firm R&D spillovers, (noncostless) international intra firm transfer of knowledge, and the notion that internal R&D increases the effectiveness of incoming spillovers. Analytical results suggest that greater efficiency of intra firm transfers and greater R&D spillovers increase the attractiveness of domestic R&D for the technology leader if the technology gap with the laggard is large. The lagging firm, in contrast, increases the share of foreign R&D as foreign technology sourcing becomes more effective. Competition encourages the leading firm to engage in foreign R&D to capture a larger share of profits on the foreign market, whereas the laggard concentrates more R&D at home to defend its home market position.

Suggested Citation

Belderbos, Rene and Lykogianni, Elissavet and Veugelers, Reinhilde, Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing, and Competition. Journal of Economics & Management Strategy, Vol. 17, Issue 3, pp. 759-779, Fall 2008. Available at SSRN: https://ssrn.com/abstract=1227209 or http://dx.doi.org/10.1111/j.1530-9134.2008.00194.x

Rene Belderbos (Contact Author)

University of Leuven (KUL) - Department of Managerial Economics, Strategy and Innovation ( email )

Naamsestraat 69
Leuven, B-3000
Belgium
+32 16 32 6912 (Phone)
+32 16 32 6732 (Fax)

Maastricht University - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Elissavet Lykogianni

affiliation not provided to SSRN

Reinhilde Veugelers

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 16 32 6908 (Phone)
+32 16 32 6732 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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