PUBLICATIONS & REPORTS
PUBLICATIONS & REPORTS
From Kitakyushu to the world: AGI, a research institute that studies Asia's economy and society
Foreign and Domestic R&D Investment
| Author | Rene Belderbos, Kyoji Fukao, Tomoko Iwasa |
|---|---|
| Date of Publication | 2006. 3 |
| No. | 2006-01 |
| Download | 384KB |
Contents Introduction
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.