Import Penetration and Domestic Process Innovation

Author: Matsubara, Kiyoshi¹

Source: Review of International Economics, Volume 13, Number 4, September 2005 , pp. 646-658(13)

Publisher: Blackwell Publishing

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Abstract:

This paper develops a model of R&D competition between domestic and foreign firms that explicitly incorporates the effect of the market structure. We focus on how differences in costs modify the effects of increases in the number of foreign firms on R&D investments of domestic firms. We show that an increase in the number of foreign firms may have a positive effect on a domestic firm's R&D investment and also show that two trade policies, tariffs or quotas, could have different effects on R&D investments of domestic firms. A welfare analysis shows that greater cost advantages increase social welfare.

Document Type: Research article

DOI: 10.1111/j.1467-9396.2005.00528.x

Affiliations: 1: Nagoya City University, Yamanohata-1, Mizuho-cho, Mizuho-ku, Nagoya 467-8501, Japan., Email: matubara@econ.nagoya-cu.ac.jp.

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