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Foreign and domestic R&D investment

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A considerable share of R&D investment is due to multinational firms that simultaneously operate R&D bases at home and abroad. We develop a simple model of foreign and domestic R&D investment and test the model's predictions on a sample of 146 Japanese multinational firms' R&D investments in Japan and the United States in 1996. The empirical results confirm that the foreign to domestic R&D ratio depends on relative technological opportunities and relative demand conditions, with foreign research expenditures responding to technological opportunity and foreign development expenditures responding to demand.

Keywords: R&D; foreign direct investment; multinational firms

Document Type: Research Article


Affiliations: 1: Department of Managerial Economics, Strategy and Innovation, Katholieke Universiteit Leuven, Leuven, Belgium 2: Institute of Economic Research, Hitotsubashi University 2-1 Naka, Kunitachi City, Tokyo, Japan 3: Yokohama City University, Graduate School of International Management, Yokohama, Japan

Publication date: January 1, 2009

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