From learning to partnership: multinational research and development cooperation in developing countries
Giorgio Barba Navaretti () and
Carlo Carraro ()
No 1662, Policy Research Working Paper Series from The World Bank
The authors analyze the determinants of interfirm agreements between industrial and developing countries for research and development (R&D) - that is, between firms with asymmetric endowments of knowledge. They develop a model in which a multinational has two options: a) setting up a subsidiary and competing with a local firm in a duopoly, or b) implementing an agreement and sharing monopoly profits. The two firms, if they chose the agreement, may also cooperate in R&D. The model shows that: a) the choice of cooperating in R&D is influenced by the intertemporal preferences of the developing country firm, the relative efficiency in R&D of the two firms, and the extent of knowledge spillovers; and b) the choice of cooperating R&D increases both the profitability and stability of the agreement. The empirical analysis is based on a data set of international arm's length agreements, part of which involve joint R&D. Testing the two-choice model supports some of the key theoretical results and assumptions. R&D agreements are particularly likely to emerge when firms are operating in knowledge-intensive industries, when the partners have a nonhierarchical contractual relationship, and when technological asymmetries between home and host countries exist but are not too great.
Keywords: Economic Theory&Research; Agricultural Knowledge&Information Systems; Scientific Research&Science Parks; Environmental Economics&Policies; Small and Medium Size Enterprises; Economic Theory&Research; Environmental Economics&Policies; Scientific Research&Science Parks; Science Education; Agricultural Knowledge&Information Systems (search for similar items in EconPapers)
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