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Intangibles Trade and MNEs: Supply-Chain Trade in R&D Services and Innovative Subsidiaries

Francisco Moris ()
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Francisco Moris: George Washington University & National Science Foundation

Journal of Industry, Competition and Trade, 2018, vol. 18, issue 3, No 5, 349-371

Abstract: Abstract This paper contributes to the literature on vertical specialization in R&D (or ‘R&D fragmentation’) and trade in intermediate services by examining the role of multinational enterprises (MNE) activities associated with bilateral foreign direct investment (FDI). Prior work in production networks (or global value chains [GVCs]) and R&D fragmentation suggests a complementarity relationship between FDI in R&D and technological knowledge flows. The paper examines this proposition empirically for R&D services trade by extending the gravity framework of supply-chain trade for intermediate services with bilateral MNE operations as economic mass variables. The results are partially consistent with the hypothesized complementarity. The econometric strategy accounts for zero trade observations. The latter addresses possible selection and consistency issues of traditional gravity trade specifications, and allows exploring extensive vs. intensive margin of trade. Understanding the role of MNEs in these transactions may be useful for policies aimed at increasing participation and upgrading in MNE-driven GVCs.

Keywords: Trade in intermediate services; R&D fragmentation; Gravity model; Global value chains; Multinational enterprises; Knowledge flows (search for similar items in EconPapers)
JEL-codes: F14 F23 O33 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10842-017-0265-0

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