Francesca Sanna-Randaccio

The Impact of Foreign Direct Investment on Home and Host Countries with Endogenous R&D

he paper analyzes the impact of FDI on home and host countries, when firms compete both in the choice of international strategy and in RD how much to invest in RD how much to sell in each market. It is shown that in high-technology sectors a policy of attracting inward FDI may increase welfare in both the home and host countries. The effect on host-country welfare is found to be more beneficial if technological spillovers are national, instead of international, in scope. Copyright 2002 by Blackwell Publishing Ltd.

The Clean Development Mechanism and Technology Transfer to China

In this study we analyse the role of the Clean Development Mechanism (CDM) established by the Kyoto Protocol in channelling foreign technology to China. The descriptive analysis investigates the sources and the determinants of foreign technology transfer based on the examination of 1,355 registered projects. As key features, we show the prominence of German firms as technology providers and the absence of a strong relationship between technology suppliers and credit buyers. We also discuss the role of leading Chinese and foreign consultants and of major credit buyers. The econometric analysis finds that project size and cost, project location, credit buyersi?½ and consultantsi?½ characteristics, as well as technology diffusion are all relevant factors in determining the probability of having a foreign supplier of technology in the respective project.

R&D and foreign direct investment with asymmetric spillovers

This paper analyzes how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, considering different sources of asymmetry such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We show that a better ability to manage knowledge flows incentivizes the firm to invest more in R&D. By introducing geographically bounded spillovers, we also find that one-way foreign direct investment (FDI) stimulates the multinational enterprise to raise its own R&D and that an FDI equilibrium is more likely to occur. Finally, spillovers localization leading to two-way FDI is welfare improving when compared with non-localized spillovers.

Foreign Direct Investment and Localized Technological Spillovers

It has been empirically shown that firms invest in foreign countries with the aim to absorb technological knowledge. However, the recent literature on technological innovation and foreign expansion has not fully taken into account these features of foreign direct investment. Introducing this new element into the analysis implies assuming that multinationals and exporters operate with different degrees of technological spillovers. Our aim is to study how these differences in the transmission of knowledge may affect the firms’ incentive to innovate and their behaviour in an international market, that is their choice between serving foreign markets via exports or foreign investments.

R&D and foreign direct investment with asymmetries in knowledge transmission

The purpose of the chapter is to analyze how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, taking into account different sources of asymmetry, such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We follow a game theoretic approach and consider a two-country imperfect competition model with two firms – one from each country – producing a homogeneous good. Both the firms’ mode of foreign expansion and R&D level are endogenously determined. We find that a better ability to manage knowledge flows incentivates the firm to invest more in R&D. By introducing geographically bounded spillovers, we also show that one-way foreign direct investment (FDI) stimulates the multinational enterprise (MNE) to raise its own R&D, due to both the elimination of transport cost and a greater ability to source. Furthermore, it emerges that when geographical proximity increases the MNEs capability to source local know-how, FDI is more likely to occur. The originality of this chapter relies on the analysis of the impact of asymmetries within an oligopoly model with endogenous R&D. Differently from other studies, this framework allows us to provide neat analytical results.

Decentralization of R&D and Know-How Flows through MNEs: Some Stylized Facts and Insights from Theory

In the traditional literature on multinational enterprises (MNEs), multinational expansion originates from the R&D activities of the firm. But rather than seeing the geographic dispersion of MNEs as a result of knowledge creation, the emphasis in the literature has shifted towards seeing the geographic dispersion of MNEs as a source for knowledge creation (see, among others, the special issue of Research Policy, 1999). In the current international environment, innovation strategies require increasingly more global sourcing, thus a need for sensing new market and technology trends worldwide. All this implies a different role for subsidiaries in the innovative strategy of the MNE: subsidiaries become important vehicles to access (local) external sources.