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Detecting which firm-specific characteristics impact market-oriented R&D

Author

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  • Kuang-Chung Hsu

    (University of Central Oklahoma)

  • Yungho Weng

    (National Chengchi University)

Abstract

This paper investigates which firm-specific characteristics lead multinational enterprises (MNEs) to increase their R&D expenditure in host countries as a way of expanding their business into local markets (market-oriented R&D). The literature that addresses this topic is quite limited because of the difficulty of separating market-oriented R&D expenditure from knowledge-sourcing R&D expenditure in the data. We argue that determining the relationship between local sales and R&D expenditure is a better way to identify whether MNEs are investing market-oriented R&D than is separating the two types of R&D. For connecting firm-specific characteristics, local-market sales, and R&D expenditure together, we adapt two-stage regressions. By employing data from Taiwanese multinationals from 2003 to 2006, we found that if an MNE moves its technology toward capital-intensive products, it increases its R&D expenditure to promote its sales in the local markets in the host country.

Suggested Citation

  • Kuang-Chung Hsu & Yungho Weng, 2018. "Detecting which firm-specific characteristics impact market-oriented R&D," Empirical Economics, Springer, vol. 55(4), pages 1695-1715, December.
    • Handle: RePEc:spr:empeco:v:55:y:2018:i:4:d:10.1007_s00181-017-1340-4
    DOI: 10.1007/s00181-017-1340-4
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    More about this item

    Keywords

    Multinationals; R&D offshoring; Foreign direct investment;
    All these keywords.

    JEL classification:

    • 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
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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