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 twocountry 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 MNE's 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. Copyright © 2008 by Emerald Group Publishing Limited.
R&D and foreign direct investment with asymmetries in knowledge transmission / PETIT TARASCON, Maria Luisa; SANNA RANDACCIO, Francesca; Sestini, Roberta. - STAMPA. - 3(2008), pp. 231-261. [10.1016/s1745-8862(08)03011-2].
R&D and foreign direct investment with asymmetries in knowledge transmission
PETIT TARASCON, Maria Luisa;SANNA RANDACCIO, Francesca;SESTINI, Roberta
2008
Abstract
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 twocountry 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 MNE's 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. Copyright © 2008 by Emerald Group Publishing Limited.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.