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Import Penetration and Domestic Process Innovation
Author(s) -
Matsubara Kiyoshi
Publication year - 2005
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2005.00528.x
Subject(s) - economics , welfare , foreign direct investment , competition (biology) , domestic market , international economics , social welfare , monetary economics , microeconomics , international trade , market economy , macroeconomics , ecology , political science , law , biology
This paper develops a model of R&D competition between domestic and foreign firms that explicitly incorporates the effect of the market structure. We focus on how differences in costs modify the effects of increases in the number of foreign firms on R&D investments of domestic firms. We show that an increase in the number of foreign firms may have a positive effect on a domestic firm's R&D investment and also show that two trade policies, tariffs or quotas, could have different effects on R&D investments of domestic firms. A welfare analysis shows that greater cost advantages increase social welfare.