The Gravity of R&D FDIs

Davide Castellani, Alfredo Jimenez Palmero () and Antonello Zanfei
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Alfredo Jimenez Palmero: Department of Economics and Business Administration, University of Burgos, Spain

No 1106, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: The negative effect of distance is justified by the existence of transport costs which hamper the international exchange of final and intermediate goods, and by higher uncertainty about local markets. We submit that distance plays a remarkably different role in the case of R&D FDIs since they mainly involve the international transfer, absorption and use of knowledge. Using data on bilateral investment projects in R&D, manufacturing and other business activities between 58 countries, we find that geographic distance does not hinder R&D FDIs as much as in the case of production and other investment activities. Furthermore, once we control for institutional and psychic distance, in particular language and religious differences, the negative effect of geographic distance vanishes.

Keywords: Multinational Firms; International Business; Technological Change; Choices and Consequences; Diffusion Processes. (search for similar items in EconPapers)
JEL-codes: F23 O33 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011, Revised 2011
New Economics Papers: this item is included in nep-cwa, nep-ino, nep-int, nep-ipr and nep-pr~
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Citations: View citations in EconPapers (10)

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