IDEAS home Printed from https://ideas.repec.org/p/ags/feemso/156578.html
   My bibliography  Save this paper

Multinational Production and the Scope of Innovation

Author

Listed:
  • Bakhtiari, Sasan
  • Minniti, Antonio
  • Naghavi, Alireza

Abstract

This research sheds light on the role of multinational production on the type of innovation performed by firms. We construct matched firm-patent data to measure the scope of innovation, that is the extent to which the output of R&D can be spread across different product lines. We focus on two features of multinational production: (i) core knowledge is geographically more difficult to transfer abroad to foreign production sites, (ii) learning spillovers can occur from international operations. The results reveal that the second effect is more likely to dominate when a firm is active in more product lines. We argue that a more diversified portfolio of products increases a firm’s span of learning from international operations, thereby enhancing its ability to engage in more fundamental research. In contrast, firms with fewer product lines that geographically separate production from innovation focus on more specialized types of R&D.

Suggested Citation

  • Bakhtiari, Sasan & Minniti, Antonio & Naghavi, Alireza, 2013. "Multinational Production and the Scope of Innovation," Economy and Society 156578, Fondazione Eni Enrico Mattei (FEEM).
  • Handle: RePEc:ags:feemso:156578
    DOI: 10.22004/ag.econ.156578
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/156578/files/NDL2013-069%20_1_.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.156578?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
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sergey Lychagin & Joris Pinkse & Margaret E. Slade & John Van Reenen, 2016. "Spillovers in Space: Does Geography Matter?," Journal of Industrial Economics, Wiley Blackwell, vol. 64(2), pages 295-335, June.
    2. Baldwin, Richard E. & Ottaviano, Gianmarco I. P., 2001. "Multiproduct multinationals and reciprocal FDI dumping," Journal of International Economics, Elsevier, vol. 54(2), pages 429-448, August.
    3. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
    4. Liu, Runjuan & Rosell, Carlos, 2013. "Import competition, multi-product firms, and basic innovation," Journal of International Economics, Elsevier, vol. 91(2), pages 220-234.
    5. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    6. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
    7. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
    8. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    9. Ufuk Akcigit & Douglas Hanley & Nicolas Serrano-Velarde, 2021. "Back to Basics: Basic Research Spillovers, Innovation Policy, and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 1-43.
    10. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, April.
    11. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    12. Megan MacGarvie, 2006. "Do Firms Learn from International Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 46-60, February.
    13. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    14. Michele Boldrin & David K. Levine, 2013. "The Case against Patents," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 3-22, Winter.
    15. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
    16. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 517-532, March.
    17. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    18. Brambilla, Irene, 2009. "Multinationals, technology, and the introduction of varieties of goods," Journal of International Economics, Elsevier, vol. 79(1), pages 89-101, September.
    19. Criscuolo, Chiara & Haskel, Jonathan E. & Slaughter, Matthew J., 2010. "Global engagement and the innovation activities of firms," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 191-202, March.
    20. Swati Dhingra, 2013. "Trading Away Wide Brands for Cheap Brands," American Economic Review, American Economic Association, vol. 103(6), pages 2554-2584, October.
    21. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 188-217.
    22. Alireza Naghavi & Maria Comune, 2012. "The Globalisation of Innovation: Challenges and Opportunities for Europe," Review of Environment, Energy and Economics - Re3, Fondazione Eni Enrico Mattei, May.
    23. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    24. Costas Arkolakis & Natalia Ramondo & Andrés Rodríguez-Clare & Stephen Yeaple, 2018. "Innovation and Production in the Global Economy," American Economic Review, American Economic Association, vol. 108(8), pages 2128-2173, August.
    25. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    26. Branstetter, Lee G., 2001. "Are knowledge spillovers international or intranational in scope?: Microeconometric evidence from the U.S. and Japan," Journal of International Economics, Elsevier, vol. 53(1), pages 53-79, 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. Sasan Bakhtiari & Antonio Minniti & Alireza Naghavi, 2013. "Multiproduct Multinationals and the Quality of Innovation," Working Papers 2013.69, Fondazione Eni Enrico Mattei.
    2. Brambilla, Irene, 2009. "Multinationals, technology, and the introduction of varieties of goods," Journal of International Economics, Elsevier, vol. 79(1), pages 89-101, September.
    3. Parenti, Mathieu, 2018. "Large and small firms in a global market: David vs. Goliath," Journal of International Economics, Elsevier, vol. 110(C), pages 103-118.
    4. Ariu, Andrea & Mayneris, Florian & Parenti, Mathieu, 2020. "One way to the top: How services boost the demand for goods," Journal of International Economics, Elsevier, vol. 123(C).
    5. Kim, Kyungmin, 2018. "Multiproduct competition in a North-South model with technological differences," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 262-273.
    6. Naoto Jinji & Xingyuan Zhang & Shoji Haruna, 2022. "Deep Integration, Global Firms, and Technology Spillovers," Advances in Japanese Business and Economics, Springer, number 978-981-16-5210-3, July.
    7. Arnarson, Björn Thor, 2020. "The superstar and the followers: Intra-firm product complementarity in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 277-304.
    8. Forslid, Rikard & Okubo, Toshihiro, 2023. "Trade, location, and multi-product firms," Regional Science and Urban Economics, Elsevier, vol. 100(C).
    9. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    10. Fontagné, Lionel & Secchi, Angelo & Tomasi, Chiara, 2018. "Exporters’ product vectors across markets," European Economic Review, Elsevier, vol. 110(C), pages 150-180.
    11. Ma, Yue & Tang, Heiwai & Zhang, Yifan, 2014. "Factor Intensity, product switching, and productivity: Evidence from Chinese exporters," Journal of International Economics, Elsevier, vol. 92(2), pages 349-362.
    12. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    13. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    14. Eckel, Carsten & Irlacher, Michael, 2017. "Multi-product offshoring," European Economic Review, Elsevier, vol. 94(C), pages 71-89.
    15. Flach, Lisandra & Irlacher, Michael & Unger, Florian, 2021. "Corporate taxes and multi-product exporters: Theory and evidence from trade dynamics," Journal of International Economics, Elsevier, vol. 132(C).
    16. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
    17. Manova, Kalina & Yu, Zhihong, 2017. "Multi-product firms and product quality," Journal of International Economics, Elsevier, vol. 109(C), pages 116-137.
    18. Helen Naughton & Pehr-Johan Norbäck & Ayça Tekin-Koru, 2016. "Aggregation Issues of Foreign Direct Investment Estimation in an Interdependent World," The World Economy, Wiley Blackwell, vol. 39(12), pages 2046-2073, December.
    19. Lisandra Flach & Michael Irlacher, 2018. "Product versus Process: Innovation Strategies of Multiproduct Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 236-277, February.
    20. Criscuolo, Chiara & Haskel, Jonathan E. & Slaughter, Matthew J., 2010. "Global engagement and the innovation activities of firms," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 191-202, March.

    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

    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:ags:feemso:156578. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    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.