 Service innovation and the proximity-concentration trade-off model of trade and FDIEconomics of Innovation and New Technology, 2014, vol. 23, issue 1, 92-108 Abstract: This paper introduces service innovation in the proximity-concentration trade-off model of trade and foreign direct investments (FDI) [Helpman, E., M. Melitz, and S. R. Yeaple 2004. "Export Versus FDI with Heterogeneous Firms." American Economic Review 94 (1): 300--316]. The idea is that innovation will have two main effects on service firms' choice between exports and FDI. First, innovative firms will on average have higher productivity levels than non-innovative enterprises. Secondly, innovators will have to pay a higher relational distance cost for undertaking export activities, and they will, therefore, prefer to avoid (or reduce) these costs by choosing an FDI strategy instead. We test the empirical relevance of this idea on a new survey data set for a representative sample of firms in all business service sectors in Norway. The results show that firms are more likely to choose FDI rather than export the greater their productivity level and the higher the relational distance costs they face. Date: 2014 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:ecinnt:v:23:y:2014:i:1:p:92-108 Ordering information: This journal article can be ordered from DOI: 10.1080/10438599.2013.828890 Access Statistics for this article Economics of Innovation and New Technology is currently edited by Professor Cristiano Antonelli More articles in Economics of Innovation and New Technology from Taylor & Francis Journals |
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