The Impact of Innovation in the Multinational Firm

Eduardo Morales and Kamran Bilir
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Eduardo Morales: Princeton University
Kamran Bilir: University of Wisconsin - Madison

No 238, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: What is the private return to innovation? When firms operate production sites in multiple countries, improvements developed at one site may be shared across others for efficiency gain. We develop a dynamic model that explicitly accounts for such transfer within the firm, and apply it to measure innovation returns for a comprehensive panel of U.S. multinationals during 1989--2009. We find that the data, which include detailed measures of affiliate production and innovation, are consistent with innovation generating returns at firm locations beyond the innovating site. Accounting for cross-plant effects of innovation, our estimates indicate the average firm realizes between 10 and 30 percent of the return to its U.S. parent R&D abroad, suggesting single-plant estimates may understate firms' gain from innovation.

Date: 2015
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dge, nep-ino, nep-knm and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:238

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