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Detecting which firm-specific characteristics impact market-oriented R&D

Kuang-Chung Hsu () and Yungho Weng
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Kuang-Chung Hsu: University of Central Oklahoma
Yungho Weng: National Chengchi University

Empirical Economics, 2018, vol. 55, issue 4, 1695-1715

Abstract: Abstract This paper investigates which firm-specific characteristics lead multinational enterprises (MNEs) to increase their R&D expenditure in host countries as a way of expanding their business into local markets (market-oriented R&D). The literature that addresses this topic is quite limited because of the difficulty of separating market-oriented R&D expenditure from knowledge-sourcing R&D expenditure in the data. We argue that determining the relationship between local sales and R&D expenditure is a better way to identify whether MNEs are investing market-oriented R&D than is separating the two types of R&D. For connecting firm-specific characteristics, local-market sales, and R&D expenditure together, we adapt two-stage regressions. By employing data from Taiwanese multinationals from 2003 to 2006, we found that if an MNE moves its technology toward capital-intensive products, it increases its R&D expenditure to promote its sales in the local markets in the host country.

Keywords: Multinationals; R&D offshoring; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: F21 F23 O24 O31 (search for similar items in EconPapers)
Date: 2018
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