IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v56y2018icp34-38.html
   My bibliography  Save this article

Trade liberalization and product R&D in a differentiated duopoly

Author

Listed:
  • Hwang, Hong
  • Hsueh, Yi-Shan
  • Peng, Cheng-Hau

Abstract

This paper employs an intra-industry trade model with one firm in each country to examine the impact of trade liberalization on firms' incentives to engage in product R&D. We show that trade liberalization may decrease a firm's product R&D if the marginal willingness to pay for the firm's innovation from its home consumers is higher than that from its foreign consumers. This negative relationship between trade liberalization and R&D investments is opposite to the standard result in the literature where the firms engage in process R&D.

Suggested Citation

  • Hwang, Hong & Hsueh, Yi-Shan & Peng, Cheng-Hau, 2018. "Trade liberalization and product R&D in a differentiated duopoly," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 34-38.
    • Handle: RePEc:eee:reveco:v:56:y:2018:i:c:p:34-38
    DOI: 10.1016/j.iref.2018.03.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056018302521
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2018.03.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Haaland, Jan I. & Kind, Hans Jarle, 2008. "R&D policies, trade and process innovation," Journal of International Economics, Elsevier, vol. 74(1), pages 170-187, January.
    2. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    3. Warren J Bilkey & Erik Nes, 1982. "Country-of-Origin Effects on Product Evaluations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 13(1), pages 89-100, March.
    4. Hong Hwang & Sugata Marjit & Cheng-Hau Peng, 2016. "Trade liberalization, technology transfer, and endogenous R&D," Oxford Economic Papers, Oxford University Press, vol. 68(4), pages 1107-1119.
    5. Hwang, Hong & Peng, Cheng-Hau & Shih, Pei-Cyuan, 2014. "Parallel imports, product innovation and market structures," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 237-245.
    6. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
    7. Sebastian Braun, 2008. "Economic Integration, Process and Product Innovation, and Relative Skill Demand," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 864-873, November.
    8. Maheswaran, Durairaj, 1994. "Country of Origin as a Stereotype: Effects of Consumer Expertise and Attribute Strength on Product Evaluations," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 21(2), pages 354-365, September.
    9. Kao, Kuo-Feng & Peng, Cheng-Hau, 2016. "Anti-dumping protection, price undertaking and product innovation," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 53-64.
    10. Brox, James A., 2003. "The impact of free trade with the United States on the pattern of Canadian consumer spending and savings," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 69-87, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kazuhiro Takauchi & Tomomichi Mizuno, 2022. "Endogenous transport price, R&D spillovers, and trade," The World Economy, Wiley Blackwell, vol. 45(5), pages 1477-1500, May.
    2. Takauchi Kazuhiro & Mizuno Tomomichi, 2024. "Consumer-Benefiting Transport Costs: The Role of Product Innovation in a Vertical Structure," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(2), pages 661-690.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hoefele, Andreas, 2016. "Endogenous product differentiation and international R&D policy," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 335-346.
    2. Yu, Julie H. & Albaum, Gerald, 2002. "Sovereignty change influences on consumer ethnocentrism and product preferences: Hong Kong revisited one year later," Journal of Business Research, Elsevier, vol. 55(11), pages 891-899, November.
    3. Sebastian Braun, 2006. "Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand," JEPS Working Papers 06-004, JEPS.
    4. N. Meltem Çakýcý, 2015. "Products, Brands and Countries: Country-ofBrand (COB) and Product-of-Country (POC) Constructs in Country-of-Origin Research," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 29(1), pages 81-93.
    5. Cuffaro, Nadia & Di Giacinto, Marina, 2015. "Credence goods, consumers’ trust in regulation and high quality exports," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 4(2), pages 1-19, August.
    6. Aby Abraham & Sanjay Patro, 2014. "‘Country-of-Origin’ Effect and Consumer Decision-making," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 39(3), pages 309-318, August.
    7. Ghosh, Arghya & Morita, Hodaka, 2008. "An economic analysis of platform sharing," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 164-186, June.
    8. Bylon Abeeku Bamfo, 2012. "Consumer Attitude Toward Products Made In Ghana," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 6(1), pages 39-46.
    9. Thomas Grebel & Lionel Nesta, 2017. "Technological Spillovers, Product Market Rivalry and R&D Investment," GREDEG Working Papers 2017-34, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    10. Bruhn, Manfred & Schwarz, Jürgen & Batt, Verena, 2012. "Swissness als Erfolgsfaktor – Einsatz des Country-of-Origin zur Stärkung von Marken-Konsumenten-Beziehungen und der Markenbindung," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 66(2), pages 153-179.
    11. Kyung Hwan Baik & Sang-Kee Kim, 2020. "Observable versus unobservable R&D investments in duopolies," Journal of Economics, Springer, vol. 130(1), pages 37-66, June.
    12. Takauchi Kazuhiro & Mizuno Tomomichi, 2024. "Consumer-Benefiting Transport Costs: The Role of Product Innovation in a Vertical Structure," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(2), pages 661-690.
    13. Amedeo Maizza & Monica Fait & Paola Scorrano & Antonio Iazzi, 2019. "How Knowledge Sharing Culture Can Become a Facilitator of the Sustainable Development in the Agrifood Sector," Sustainability, MDPI, vol. 11(4), pages 1-15, February.
    14. Bernd Theilen, 2012. "Product differentiation and competitive pressure," Journal of Economics, Springer, vol. 107(3), pages 257-266, November.
    15. Bourreau, Marc & Dogan, Pinar & Manant, Matthieu, 2010. "Size of RJVs and Degree of Cooperation in Product Development," Scholarly Articles 4621101, Harvard Kennedy School of Government.
    16. Fernanda Lazzari & Luiz Antonio Slongo, 2015. "The Placebo Effect in Marketing: the Ability of Country of Origin to Modify Product Performance," Brazilian Business Review, Fucape Business School, vol. 12(5), pages 39-56, September.
    17. Alvaro Cuervo-Cazurra & C. Annique Un, 2011. "Economic Integration and the Technological Capabilities of Domestic Firms," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume II, chapter 4, Edward Elgar Publishing.
    18. Han, Tien-Der & Mukherjee, Arijit, 2023. "Mergers of complements, endogenous product differentiation and welfare," Mathematical Social Sciences, Elsevier, vol. 126(C), pages 30-41.
    19. Baldauf, Artur & Cravens, Karen S. & Diamantopoulos, Adamantios & Zeugner-Roth, Katharina Petra, 2009. "The Impact of Product-Country Image and Marketing Efforts on Retailer-Perceived Brand Equity: An Empirical Analysis," Journal of Retailing, Elsevier, vol. 85(4), pages 437-452.
    20. Amine, Lyn Suzanne, 2008. "Country-of-origin, animosity and consumer response: Marketing implications of anti-Americanism and Francophobia," International Business Review, Elsevier, vol. 17(4), pages 402-422, August.

    More about this item

    Keywords

    Product innovation; Trade liberalization; Marginal willingness to pay;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:56:y:2018:i:c:p:34-38. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.