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Globalization and Innovation in Emerging Markets

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Author Info
Yuriy Gorodnichenko (University of Michigan)
Jan Svejnar (University of Michigan)
Katherine Terrell (University of Michigan)

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Abstract

Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data on firms in 27 transition economies, we test for the effects of globalization through the impact of increased competition and foreign direct investment on domestic firms' efforts to raise their capability (innovate) by upgrading their technology or the quality of their product/service, taking into account firm heterogeneity. We find competition has a negative effect on innovation, especially for firms further from the frontier, and that the supply chain of multinational enterprises and international trade are important channels for domestic firm innovation. We do not find support for the inverted U effect of competition on innovation. There is weak evidence that firms in a more pro-business environment invest more in innovation and are more likely to display the inverted U relationship between competition and innovation.

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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 583.

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Length: 43 pages
Date of creation: Apr 2008
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Handle: RePEc:mie:wpaper:583

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Keywords: emerging markets; globalization; innovation;

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  3. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," IZA Discussion Papers 3079, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Klara Sabirianova Peter & Jan Svejnar & Katherine Terrell, 2004. "Distance to the Efficiency Frontier and FDI Spillovers," William Davidson Institute Working Papers Series 2004-721, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Machikita, Tomohiro & Ueki, Yasushi, 2009. "Linked versus Non-linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia," IDE Discussion Papers 188, Institute of Developing Economies, Japan External Trade Organization(JETRO). [Downloadable!]
  2. Philip R. Lane IIIS, Trinity College Dublin and CEPR, 2009. "Innovation and Financial Globalisation," The Institute for International Integration Studies Discussion Paper Series iiisdp299, IIIS. [Downloadable!]
  3. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," IZA Discussion Papers 3079, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Fernandes, Ana M. & Paunov, Caroline, 2009. "Does tougher import competition foster product quality upgrading ?," Policy Research Working Paper Series 4894, The World Bank. [Downloadable!]
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