IDEAS home Printed from https://ideas.repec.org/a/spr/portec/v13y2014i1p25-38.html
   My bibliography  Save this article

Relocation and investment in R&D by firms

Author

Listed:
  • Juan Bárcena-Ruiz
  • María Garzón

Abstract

The literature on foreign direct investment has analyzed corporate location decisions when firms invest in R&D to reduce production costs. Such firms may set up new plants in other developed countries while maintaining their domestic plants. In contrast, we here consider firms that close down their domestic operations and relocate to countries where wage costs are lower. Thus, we assume that firms may reduce their production costs by investing in R&D and likewise by moving their plants abroad. We show that these two mechanisms are complementary. When a firm relocates it invests more in R&D than when it does not change its location and, therefore, its production cost is lower in the first case. As a result, investment in R&D encourages firms to relocate. Copyright ISEG 2014

Suggested Citation

  • Juan Bárcena-Ruiz & María Garzón, 2014. "Relocation and investment in R&D by firms," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(1), pages 25-38, April.
    • Handle: RePEc:spr:portec:v:13:y:2014:i:1:p:25-38
    DOI: 10.1007/s10258-014-0096-4
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10258-014-0096-4
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10258-014-0096-4?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. J.Peter Neary, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 680-693, November.
    2. Maria Petit & Francesca Sanna-Randaccio, 1998. "Technological innovation and multinational expansion: A two-way link?," Journal of Economics, Springer, vol. 68(1), pages 1-26, February.
    3. Kjell Erik Lommerud & Frode Meland & Lars S¯rgard, 2003. "Unionised Oligopoly, Trade Liberalisation and Location Choice," Economic Journal, Royal Economic Society, vol. 113(490), pages 782-800, October.
    4. Fumagalli, Chiara, 2003. "On the welfare effects of competition for foreign direct investments," European Economic Review, Elsevier, vol. 47(6), pages 963-983, December.
    5. Blomström, Magnus & Kokko, Ari, 2003. "The Economics of Foreign Direct Investment Incentives," EIJS Working Paper Series 168, Stockholm School of Economics, The European Institute of Japanese Studies.
    6. repec:bla:reviec:v:10:y:2002:i:2:p:278-98 is not listed on IDEAS
    7. Leahy, Dermot & Montagna, Catia, 2000. "Unionisation and Foreign Direct Investment: Challenging Conventional Wisdom?," Economic Journal, Royal Economic Society, vol. 110(462), pages 80-92, March.
    8. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
    9. Leahy, Dermot & Pavelin, Stephen, 2008. "Playing away to win at home," Journal of Economics and Business, Elsevier, vol. 60(5), pages 455-468.
    10. Tauman, Y & Weiss, Y, 1987. "Labor Unions and the Adoption of New Technology," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 477-501, October.
    11. Petit, Maria-Luisa & Sanna-Randaccio, Francesca, 2000. "Endogenous R&D and foreign direct investment in international oligopolies," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 339-367, February.
    Full references (including those not matched with items on IDEAS)

    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. Juan Bárcena-Ruiz & María Garzón, 2014. "Relocation and investment in R&D by firms," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(1), pages 25-38, April.
    2. Bárcena Ruiz, Juan Carlos & Garzón San Felipe, María Begoña, 2011. "Relocation and Investment in R&D by Firms," IKERLANAK 2011-52, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    3. Brcena-Ruiz, Juan Carlos & Garzn, Mara Begoa, 2009. "Relocation and public ownership of firms," Journal of the Japanese and International Economies, Elsevier, vol. 23(1), pages 71-85, March.
    4. Bruno Decreuse & Paul Maarek, 2015. "FDI and the Labor Share in Developing Countries : A Theory and Some Evidence," Annals of Economics and Statistics, GENES, issue 119-120, pages 289-319.
    5. Quan Dong & Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2015. "Restrictions on Foreign Investments and the Relocation of Firms," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 250-265, December.
    6. Cao, Jiyun & Mukherjee, Arijit, 2018. "Foreign direct investment, unionised labour markets and welfare," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 330-339.
    7. Bertrand, Olivier & Zuniga, Pluvia, 2006. "R&D and M&A: Are cross-border M&A different? An investigation on OECD countries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 401-423, March.
    8. Chih‐Hai Yang & Yi‐Yin Wu & Hui‐Lin Lin, 2010. "Outward Investment To China And Local Innovation Of Taiwanese Manufacturing Firms," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 538-557, December.
    9. Kuang-Feng Cheng & Chien-Shu Tsai & Chu-Chuan Hsu & Szu-Chung Lin & Ting-Chung Tsai & Jen-Yao Lee, 2019. "Emission Tax and Compensation Subsidy with Cross-Industry Pollution," Sustainability, MDPI, vol. 11(4), pages 1-23, February.
    10. Hyun-Ju Koh & Ferdinand Mittermaier, 2009. "The winner gives it all: Unions, tax competition and offshoring," Working Papers 079, Bavarian Graduate Program in Economics (BGPE).
    11. Nelly Exbrayat & Carl Gaigné & Stéphane Riou, 2012. "The effects of labour unions on international capital tax competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1480-1503, November.
    12. Laixun Zhao & Makoto Okamura, 2010. "Competing to Outsource in the South," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 427-442, August.
    13. Paulo Bastos & Odd Rune Straume, 2012. "Globalization, product differentiation, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 857-878, August.
    14. Andreas Haufler & Ferdinand Mittermaier, 2011. "Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment," Economic Journal, Royal Economic Society, vol. 121(553), pages 793-818, June.
    15. Marco de Pinto & Jörg Lingens, 2019. "Unionization, information asymmetry and the de‐location of firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(4), pages 1782-1823, November.
    16. Simona Iammarino, 2018. "FDI and regional development policy," Journal of International Business Policy, Palgrave Macmillan, vol. 1(3), pages 157-183, December.
    17. Cooray, Arusha & Tamazian, Artur & Vadlamannati, Krishna Chaitanya, 2014. "What drives FDI policy liberalization? An empirical investigation," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 179-189.
    18. Michele Santoni, 2009. "Does product market integration lead to decentralised wage bargaining institutions?," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1091, Universitá degli Studi di Milano.
    19. Leahy, Dermot & Pavelin, Stephen, 2008. "Playing away to win at home," Journal of Economics and Business, Elsevier, vol. 60(5), pages 455-468.
    20. Arghya Ghosh & Jonathan Lim, 2013. "Cooperative and non-cooperative R&D and trade costs," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(6), pages 942-958, September.

    More about this item

    Keywords

    Relocation; R&D; Social welfare; Imperfect competition; D6; F16; J51; L13;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    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:spr:portec:v:13:y:2014:i:1:p:25-38. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.