Productivity spillovers from foreign affiliates and domestic firm internationalization: firm-level evidence for Belgium.

We examine to what extent local firms can reap productivity gains from knowledge spillovers due to the presence of manufacturing affiliates of multinational firms, taking into account that domestic firms' internationalization through import and export activities may also lead to productivity growth. We examine spillovers occurring within sectors as well as those potentially occurring across industries due to client or supply relations of local firms with foreign-owned affiliates in downstream and upstream sectors, respectively. Fixed affects panel analysis on a sample of 4594 local Belgian firms during 2000-2007 reveal significant positive effects of horizontal and backward spillovers on the productivity levels of local firms. Evidence of productivity benefits due to forward linkages from foreign-owned affiliates supplying local firms is only be found for local firms with no export or import activities. Both importing and exporting activities are associated with higher productivity. In general, backward spillovers are weaker for exporting firms, and forward spillovers do not benefit importing firms, suggesting that local spillovers from client/supply relations with foreign multinationals and internationalization can be seen as alternative ways in which internationalization of an economy can enhance productivity performance.

Undertakings and antidumping FDI in Europe.

This paper studies the effects of EU antidumping policy when foreign firms have the possibility to 'jump' antidumping measures by engaging in foreign direct investment (FDI) in the EU. Using a multi-stage framework, we study the EU administration's choice between an antidumping duty and a price-undertaking, taking into account the effect of these measures on the location decision of the foreign firm and the subsequent price competition between local and foreign firms. Our findings suggest that the EU administration acting purely in the EU industry's interest prefers a price-undertaking to a duty, if the latter leads to 'duty jumping' FDI. FDI toughens price competition in the EU market and leaves local firms worse off. Antidumping jumping FDI will only occur if the EU administration has broader objectives than just protecting the profitability of EU industry, if fixed costs of FDI are not too high, and if the cost advantage of foreign firms are, at least partially, firm-specific and transferable abroad. If foreign firms are able to act strategically taking into account EU antidumping policy, the presence of antidumping law can also discourage FDI that would have taken place under free trade conditions.Studies; Effects; Investment; Competition; Industry; Profitability;

Intra-firm Technology Transfer and R&D in Foreign Affiliates: Substitutes or Complements? Evidence from Japanese Multinational Firms

R&D in foreign affiliates and technology transferred from their parent firms are important potential drivers of productivity in host countries. In this paper we examine the simultaneous impact of local R&D and intra-firm international technology transfer on productivity growth in foreign affiliates. We estimate a dynamic productivity model on a large sample of Japanese manufacturing affiliates worldwide in 1996-1997 and 1999-2000. We find that both affiliate R&D and intra-firm technology transfer contribute to productivity growth, while technology transfer exhibits decreasing marginal returns. The two sources of technology are complements: use of one source of technology increases the marginal impact of the other.R&D, technology transfer, multinational firms

The Productivity Effects of Internal and External R&D: Evidence From a Dynamic Panel Data Model

We examine the impact of internal and external R&D on labor productivity in a 6-year panel of Dutch manufacturing firms. We apply a dynamic linear panel data model that allows for decreasing or increasing returns to scale in internal and external R&D and for economies of scope. We find complementarity between internal and external R&D, with a positive impact of external R&D only evident in case of sufficient internal R&D. These findings confirm the role of internal R&D in enhancing absorptive capacity and hence the effective utilization of external knowledge. The scope economies due the combination of internal and external R&D are accentuated by decreasing results to scale at high levels of internal and external R&D. The analysis indicates that on average productivity grows by increasing the share of external R&D in total R&D.R&D, Innovation, Complementarity, Panel Data

Persistence of, and interrelation between, horizontal and vertical technology alliances.

The authors explore to what extent there is persistence in, and interrelation between, alliance strategies with different partner types (customers, suppliers, competitors). In a panel data set of innovation-active firms in the Netherlands from 1996 to 2004, the authors find persistence in alliance strategies with all three types of partners, but customer alliance strategies are more persistent than supplier alliance strategies and competitor alliance strategies. A positive interrelation between customer and supplier alliance strategies and a high persistence of joint supplier and customer alliance strategies are consistent with the advantages of value chain integration in innovation efforts. Prior engagement in horizontal (competitor) alliances increases the propensity to engage in vertical alliance strategies, but this effect occurs only with a longer lag. Overall, the authors’ findings suggest that alliance strategies with different partner types are both heterogeneous in persistence and (temporally) interrelated. This suggests that intertemporal relationships between different types of alliances may be as important as their simultaneous relationship in alliance portfolios.

Does Excellence in Academic Research Attract Foreign R&D?.

We examine the role of host countries’ academic research strengths in global R&D location decisions by multinational firms. While we expect that a firm’s propensity to perform R&D in a host country increases with the strength of local academic research, firms are expected to be heterogeneously positioned to benefit from academic research strengths due to differences in the capacity to absorb and utilize scientific knowledge. We find support for these conjectures in an analysis of foreign R&D activities in 40 host countries and 30 technology fields by 176 leading European, US and Japanese firms during the periods 1995-1998 and 1999-2002. Controlling for a wide range of host country factors, the number of relevant ISI publications by scientists based in the host country has a substantial positive impact on the propensity to conduct foreign R&D. The effect of academic research is significantly larger for firms with a stronger science orientation in R&D - as indicated by citations to scientific literature in prior patents. For host countries with a strong relevant science base, this greater responsiveness of science oriented firms more than offsets a generally greater inclination to concentrate R&D at home. The findings appear robust across a variety of specifications.

Foreign and Domestic R&D Investment

A considerable share of R&D investment is due to multinational firms that simultaneously operate R&D bases at home and abroad. The existing empirical literature on R&D investment has however ignored the possibility that domestic and foreign R&D investments are simultaneously decided. In this paper, we draw on the technological opportunity, appropriability, and demand framework suggested by Cohen and Klepper (1996) to develop a simple model of foreign and domestic R&D investment. We test the model's predictions concerning the ratio of foreign to domestic R&D investment 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 R&D ratio depends on relative technological opportunities, relative demand conditions, and a proxy for firm-level R&D productivity. When differentiating between research and development activities, foreign research is driven by technological opportunity and foreign development by the demand factor, as expected.R&D, multinational firms, Foreign Direct Investment

Internal basic research, external basic research and the technological performance of pharmaceutical firms.

We evaluate the impact of basic research on pharmaceutical firms’ technological performance, distinguishing between internal basic research and the exploitation of external basic research findings. We find that firms increase their performance by engaging more in internal basic research, in particular if basic research is conducted in collaboration with university scientists. The exploitation of external basic research improves performance, while the magnitude increases with firms’ involvement in internal basic research. Hence, internal basic research and the exploitation of external basic research are complements, suggesting that internal basic research provides firms with the skills to exploit external basic research more effectively.basic research; industrial innovation; pharmaceutical industry;