Title: The returns to foreign R&D
Other Titles: MSI Working Paper
Authors: Belderbos, Rene
Lokshin, Boris
Sadowski, Bert
Issue Date: Sep-2014
Publisher: KU Leuven - Faculty of Economics and Business
Series Title: FEB Research Report - MSI_1416 vol:MSI_1416
Abstract: Extant research on R&D internationalization has not examined how effective foreign R&D investments are in generating positive returns for the investing firms, in particular in comparison and conjunction with the effects of domestic R&D investments. We examine the effectiveness of international knowledge sourcing through foreign R&D in an empirical analysis of the productivity effects of foreign and domestic R&D investments in a large panel of firms based in the Netherlands. We argue that foreign and domestic R&D will exhibit complementarity in their effects on productivity, but that the roles of domestic and foreign R&D depend on the relative position of the home country with respect to the global technology frontier and the related relative opportunities for knowledge sourcing abroad. We estimate a dynamic panel data model derived from a knowledge stock augmented production function framework allowing for productivity convergence and declining returns to R&D. We confirm that for firms active in industries in which the home country is behind the global technology frontier, foreign R&D provides positive returns and has a complementary relationship with domestic R&D. For industries at the global technology frontier, in contrast, domestic R&D is the primary source of productivity growth.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Department of Managerial Economics, Strategy and Innovation (MSI), Leuven

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