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Explaining the Current Innovative R&D Outsourcing to Developing Countries

Explaining the Current Innovative R&D Outsourcing to Developing Countries While multinational firms from developed countries have used researchers from emerging areas to assist in the adaption of an existing product, few multinational firms have carried out innovative R&D, or R&D for the creation of a new product, in these areas. Using the threat of imitation and wage differences of researchers across regions, this study proposes a partial equilibrium model to explain the lack of innovative R&D in developing countries. I build a North-South model examining a single firm’s choice of research locations. The model predicts that weak IPR-protection in developing countries does not necessarily explain the lack of Southern research. In some situations, reduced IPR-protection can even increase Southern research. Harsh competition resulting from information leaks coupled with weak IPR-protection can explain much of the lack of innovative research investment in the developing world. My model also predicts that firms with low research needs, or firms in low-tech industries, locate their R&D in the North. Firms with medium research need locate in both countries while the firms with the largest research needs, or firms in high-tech industries, locate research in just the South. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Explaining the Current Innovative R&D Outsourcing to Developing Countries

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References (46)

Publisher
Springer Journals
Copyright
Copyright © 2018 by Springer Science+Business Media, LLC, part of Springer Nature
Subject
Economics; Industrial Organization; Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-018-0288-1
Publisher site
See Article on Publisher Site

Abstract

While multinational firms from developed countries have used researchers from emerging areas to assist in the adaption of an existing product, few multinational firms have carried out innovative R&D, or R&D for the creation of a new product, in these areas. Using the threat of imitation and wage differences of researchers across regions, this study proposes a partial equilibrium model to explain the lack of innovative R&D in developing countries. I build a North-South model examining a single firm’s choice of research locations. The model predicts that weak IPR-protection in developing countries does not necessarily explain the lack of Southern research. In some situations, reduced IPR-protection can even increase Southern research. Harsh competition resulting from information leaks coupled with weak IPR-protection can explain much of the lack of innovative research investment in the developing world. My model also predicts that firms with low research needs, or firms in low-tech industries, locate their R&D in the North. Firms with medium research need locate in both countries while the firms with the largest research needs, or firms in high-tech industries, locate research in just the South.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Dec 12, 2018

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