Heterogeneity in the Internationalization of R&D: Implications for Anomalies in Finance and Macroeconomics

31 Pages Posted: 20 Oct 2017

See all articles by Patrick Grüning

Patrick Grüning

Latvijas Banka; Vilnius University - Faculty of Economics and Business Administration

Date Written: October 17, 2017

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.

Keywords: Heterogeneous innovation, Technology spillover, Endogenous growth, Creative destruction, International finance

JEL Classification: E22, F31, G12, O30, O41

Suggested Citation

Grüning, Patrick, Heterogeneity in the Internationalization of R&D: Implications for Anomalies in Finance and Macroeconomics (October 17, 2017). SAFE Working Paper No. 185, Available at SSRN: https://ssrn.com/abstract=3055684 or http://dx.doi.org/10.2139/ssrn.3055684

Patrick Grüning (Contact Author)

Latvijas Banka ( email )

Riga
Latvia

Vilnius University - Faculty of Economics and Business Administration ( email )

Sauletekio al. 9 (II building)
Vilnius, LT-10222
Lithuania

HOME PAGE: http://www.evaf.vu.lt/en/

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