Location of R&D and High-Tech Production by Vertically Integrated Multinationals

Karolina Ekholm () and Katariina Nilsson Hakkala

No 616, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper presents evidence that, in Europe, production of high-tech goods is attracted to large markets, while R&D activities tend to be located away from them. In order to explain this phenomenon, we develop a two-country general equilibrium model where firms make separate choices about the location of R&D and high-tech production. There are two agglomeration forces: R&D spillovers and a home-market effect creating incentives for firms to locate production in the relatively large market. We show that, for relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialize in R&D. We also discuss the welfare consequences of different outcomes with respect to the location of R&D, showing that while skilled labor may gain from hosting an agglomeration of R&D activities, unskilled labor will lose.

Keywords: Monopolistic Competition; R&D; High-Tech Production; Agglomeration Economies (search for similar items in EconPapers)
JEL-codes: F12 F23 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2004-04-26
New Economics Papers: this item is included in nep-com and nep-ino
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https://www.ifn.se/Wfiles/wp/WP616.pdf (application/pdf)

Related works:
Journal Article: Location of R&D and High-Tech Production by Vertically Integrated Multinationals (2007)
Working Paper: Location of R&D and High-Tech Production by Vertically-Integrated Multinationals (2003)
Working Paper: Location of R&D and High-Tech Production by Vertically Integrated Multinationals (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0616

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