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Moving ideas across borders: Foreign inventors, patents and FDI

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  • Ana Cuadros
  • Antonio Navas
  • Jordi Paniagua

Abstract

This paper explores the link between innovation, migration and Foreign Direct Investment (FDI) empirically within a theoretically consistent framework. It analyses how migrant inventors enhance multinational firms' adaptive innovation performance and ultimately foster FDI towards the migrant's country of origin. Foreign migrant inventors (migrants who filed a patent in their host country) possess a unique mix of technical knowledge and cultural background that contribute to adapting Research and Development (R&D) activities for foreign markets. Therefore, FDI increases in country‐pair‐sectors with specific endogenous investment in quality, which depends on the migrants in the R&D sector. We constructed a novel panel country‐sector data set including FDI, patents and migrant inventors and applied a two‐stage structural gravity estimation procedure using migrant inventors as a valid instrument for patents. The results show sizable effects on the extensive and intensive margins of greenfield FDI.

Suggested Citation

  • Ana Cuadros & Antonio Navas & Jordi Paniagua, 2022. "Moving ideas across borders: Foreign inventors, patents and FDI," The World Economy, Wiley Blackwell, vol. 45(12), pages 3652-3678, December.
    • Handle: RePEc:bla:worlde:v:45:y:2022:i:12:p:3652-3678
    DOI: 10.1111/twec.13303
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    1. Ana Cuadros & Antonio Navas & Jordi Paniagua, 2022. "Moving ideas across borders: Foreign inventors, patents and FDI," The World Economy, Wiley Blackwell, vol. 45(12), pages 3652-3678, December.

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    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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