Multinationals, R&D and Endogenous Productivity Asymmetries
Armando Garcia Pires ()
International Economic Journal, 2015, vol. 29, issue 1, 95-119
We analyze the influence of endogenous productivity asymmetries between firms, in terms of competitiveness and size, on multinational activity. In the model, productivity depends on cost-reducing R&D (research and development). We show that when firms differ on commitment power in R&D, the R&D leader, independently of being a multinational or a domestic firm, tends to invest more in R&D than the R&D follower. Because of these productivity advantages, the R&D leader can more easily become multinational. Therefore, in addition to the proximity-concentration trade-off, we identify another FDI (foreign direct investment) determinant: technological competition.
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Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:29:y:2015:i:1:p:95-119
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