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Innovation in Tow: R&D FDI and investment incentives

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  • Wellhausen Rachel L.

    (Department of Government, 158 W 21st St Stop A1800, University of Texas at Austin, Austin, TX 78712, USA)

Abstract

Multinational corporations (MNCs) increasingly internationalize research and development (R&D), but the distribution of foreign direct investment (FDI) in R&D differs from that of general FDI. I use data on US MNC affiliates’ investments abroad (2001–2008) to demonstrate that increasing value added predicts more future R&D FDI, as R&D FDI is an upgrade decision. I then use data on R&D investment incentives to show that, while governments spend resources on R&D incentives, these can be negative predictors of R&D FDI. The findings imply that government efforts are best directed at incremental encouragement of value-added activities, as efforts to jump to R&D FDI are misguided.

Suggested Citation

  • Wellhausen Rachel L., 2013. "Innovation in Tow: R&D FDI and investment incentives," Business and Politics, De Gruyter, vol. 15(4), pages 467-491, December.
    • Handle: RePEc:bpj:buspol:v:15:y:2013:i:4:p:467-491:n:4
    DOI: 10.1515/bap-2013-0014
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    References listed on IDEAS

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