Southern Innovation and Backward Knowledge Spillovers: A Dynamic FDI Model

Keith Maskus and Yin He

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: We develop a model in which the proportion of Northern firms choosing to become multinationals is endogenous. In the benchmark model, Northern firms engage in innovation based on the local knowledge stock and learning-by-doing (LBD), and a share of these products is transferred to Southern production via FDI. An increase in Southern imitation limits the multinationalization rate. We extend the model to permit Southern innovation based on the amount of local knowledge and LBD. Because Southern firms have higher innovation costs, this generates inefficient specialization in both regions and reduces global growth. However, it generates a U-shaped relationship between FDI and local imitation. We also allow for “backward” spillovers in knowledge to Northern innovation, which partially restores global efficiency and growth. We find that Southern R&D investments follow an inverse U-shape as imitation risk rises. A fall in fixed FDI setup costs or a rise in the LBD spillover in either region raises innovation growth.

Keywords: Innovation; learning-by-doing; patents; multinational investment; growth (search for similar items in EconPapers)
JEL-codes: F12 F23 O31 O34 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2009-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://degit.sam.sdu.dk/papers/degit_14/c014_001.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to degit.sam.sdu.dk:80 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:deg:conpap:c014_001

Access Statistics for this paper

More papers in DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade Contact information at EDIRC.
Bibliographic data for series maintained by Jan Pedersen ().