Foreign and Domestic R&D Investment

Rene Belderbos, Kyoji Fukao and Tomoko Iwasa

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

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.

Keywords: R&D; multinational firms; Foreign Direct Investment (search for similar items in EconPapers)
JEL-codes: F23 O32 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-ino and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Foreign and domestic R&D investment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hst:hstdps:d05-140

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