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Foreign direct investment and R&D-offshoring


Gersbach, Hans; Schmutzler, Armin (2011). Foreign direct investment and R&D-offshoring. Oxford Economic Papers, 63(1):134-157.

Abstract

We analyse a two-country model of Foreign Direct Investment (FDI) and R&Doffshoring. In the basic model, two firms, each of which is originally situated in only one of the two countries, first decide whether to build a plant abroad. Then,they decide whether to relocate R&D activities offshore. Finally, they engage in product-market competition. In this model, FDI liberalization causes a relocation of R&D activities if intrafirm communication is sufficiently well developed, external spillovers are substantial, competition is not too strong and foreign markets are not too small. Surprisingly, such a relocation of R&D activities usually nevertheless increases
domestic welfare.

Abstract

We analyse a two-country model of Foreign Direct Investment (FDI) and R&Doffshoring. In the basic model, two firms, each of which is originally situated in only one of the two countries, first decide whether to build a plant abroad. Then,they decide whether to relocate R&D activities offshore. Finally, they engage in product-market competition. In this model, FDI liberalization causes a relocation of R&D activities if intrafirm communication is sufficiently well developed, external spillovers are substantial, competition is not too strong and foreign markets are not too small. Surprisingly, such a relocation of R&D activities usually nevertheless increases
domestic welfare.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:January 2011
Deposited On:12 Jan 2011 16:07
Last Modified:05 Apr 2016 14:30
Publisher:Oxford University Press
ISSN:0030-7653
Additional Information:This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Oxford Economic Papers following peer review. The definitive publisher-authenticated version Oxford Economic Papers, 63(1): 134-157, is available online at: http://oep.oxfordjournals.org/content/63/1/134.abstract.
Publisher DOI:https://doi.org/10.1093/oep/gpq024

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