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Foreign and Domestic R&D Investment

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  • Rene Belderbos
  • Kyoji Fukao
  • Tomoko Iwasa

Abstract

A considerable share of R&D investment is due to multinational firms that simultaneously operate R&D bases at home and abroad. The existing empirical literature on R&D investment has however ignored the possibility that domestic and foreign R&D investments are simultaneously decided. In this paper, we draw on the technological opportunity, appropriability, and demand framework suggested by Cohen and Klepper (1996) to develop a simple model of foreign and domestic R&D investment. We test the model's predictions concerning the ratio of foreign to domestic R&D investment on a sample of 146 Japanese multinational firms' R&D investments in Japan and the United States in 1996. The empirical results confirm that the foreign R&D ratio depends on relative technological opportunities, relative demand conditions, and a proxy for firm-level R&D productivity. When differentiating between research and development activities, foreign research is driven by technological opportunity and foreign development by the demand factor, as expected.

Suggested Citation

  • Rene Belderbos & Kyoji Fukao & Tomoko Iwasa, 2006. "Foreign and Domestic R&D Investment," Hi-Stat Discussion Paper Series d05-140, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:hstdps:d05-140
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    References listed on IDEAS

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    1. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
    2. Kleinknecht, Alfred, 1987. "Measuring R&D in Small Firms: How Much Are We Missing?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 253-256, December.
    3. John Cantwell & José Molero (ed.), 2003. "Multinational Enterprises, Innovative Strategies and Systems of Innovation," Books, Edward Elgar Publishing, number 3182.
    4. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation And Productivity: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
    5. von Zedtwitz, Maximilian & Gassmann, Oliver, 2002. "Market versus technology drive in R&D internationalization: four different patterns of managing research and development," Research Policy, Elsevier, vol. 31(4), pages 569-588, May.
    6. Iwasa, Tomoko & Odagiri, Hiroyuki, 2004. "Overseas R&D, knowledge sourcing, and patenting: an empirical study of Japanese R&D investment in the US," Research Policy, Elsevier, vol. 33(5), pages 807-828, July.
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    Cited by:

    1. Nepelski, Daniel & De Prato, Giuditta, 2011. "Internationalisation of ICT R&D in Asia vis a vis the world regions," MPRA Paper 39281, University Library of Munich, Germany.
    2. Giuditta Prato & Daniel Nepelski, 2014. "Global technological collaboration network: network analysis of international co-inventions," The Journal of Technology Transfer, Springer, vol. 39(3), pages 358-375, June.
    3. Daniel Nepelski & Giuditta De Prato, 2015. "Corporate control, location and complexity of ICT R&D: A network analysis at the city level," Urban Studies, Urban Studies Journal Limited, vol. 52(4), pages 721-737, March.
    4. Gary A.S. Cook & Hans Lööf & Naresh R. Pandit & Börje Johansson, 2012. "The influence of clustering on MNE location and innovation in Great Britain," Chapters, in: Charlie Karlsson & Börje Johansson & Roger R. Stough (ed.), Entrepreneurship, Social Capital and Governance, chapter 3, pages 53-82, Edward Elgar Publishing.
    5. Bart Leten & Rene Belderbos & Bart Van Looy, 2016. "Entry and Technological Performance in New Technology Domains: Technological Opportunities, Technology Competition and Technological Relatedness," Journal of Management Studies, Wiley Blackwell, vol. 53(8), pages 1257-1291, December.
    6. 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.
    7. Hall, Bronwyn H., 2011. "The internationalization of R&D," MERIT Working Papers 2011-049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    8. Vandana Ujjual & Parimal Patel & Rishikesha T. Krishnan & Srivardhini Keshavamurthy & RueyLin Hsiao & Frank Yan Zhao, 2011. "Management and Organisation of Knowledge Creation in Emerging Markets: a Perspective from subsidiaries of EU MNEs," SPRU Working Paper Series 192, SPRU - Science Policy Research Unit, University of Sussex Business School.
    9. Belderbos, Rene & Leten, Bart & Suzuki, Shinya, 2009. "Does Excellence in Academic Research Attract Foreign R&D?," MERIT Working Papers 2009-066, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Yang, Chih-Hai & Matsuura, Toshiyuki & Ito, Tadashi, 2019. "R&D and patenting activities of foreign firms in China: The case of Japan," Japan and the World Economy, Elsevier, vol. 49(C), pages 151-160.
    11. Giuditta De Prato & Daniel Nepelski, 2012. "Global R&D network. A network analysis of international R&D centres," JRC Research Reports JRC79478, Joint Research Centre, revised Nov 2012.
    12. Kyoji Fukao, 2013. "Explaining Japan's Unproductive Two Decades," Asian Economic Policy Review, Japan Center for Economic Research, vol. 8(2), pages 193-213, December.
    13. René Belderbos, 2006. "R&D Activities in East Asia by Japanese, European, and US Multinationals," Microeconomics Working Papers 21887, East Asian Bureau of Economic Research.
    14. To-Han Chang & Wen-Bin Chuang, 2016. "Overseas R&D and Taiwan-Based Firm?s Productivity - Does Internal Technological Capability Matter?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(9), pages 499-509, September.

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    More about this item

    Keywords

    R&D; multinational firms; Foreign Direct Investment;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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