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Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing, and Competition
Author(s) -
Belderbos René,
Lykogianni Elissavet,
Veugelers Reinhilde
Publication year - 2008
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2008.00194.x
Subject(s) - multinational corporation , competition (biology) , attractiveness , internationalization , business , lagging , incentive , productivity , industrial organization , position (finance) , monetary economics , economics , international trade , microeconomics , finance , medicine , psychology , ecology , macroeconomics , pathology , psychoanalysis , biology
This paper develops a model of strategic interaction in R&D internationalization decisions between two multinational firms, competing both abroad and in their home markets. It examines different incentives for foreign R&D faced by a technology leader and a technology laggard. The model takes into account the impact of local inter firm R&D spillovers, (noncostless) international intra firm transfer of knowledge, and the notion that internal R&D increases the effectiveness of incoming spillovers. Analytical results suggest that greater efficiency of intra firm transfers and greater R&D spillovers increase the attractiveness of domestic R&D for the technology leader if the technology gap with the laggard is large. The lagging firm, in contrast, increases the share of foreign R&D as foreign technology sourcing becomes more effective. Competition encourages the leading firm to engage in foreign R&D to capture a larger share of profits on the foreign market, whereas the laggard concentrates more R&D at home to defend its home market position.