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Intangibles Trade and MNEs: Supply-Chain Trade in R&D Services and Innovative Subsidiaries

Intangibles Trade and MNEs: Supply-Chain Trade in R&D Services and Innovative Subsidiaries This paper contributes to the literature on vertical specialization in R&D (or ‘R&D fragmentation’) and trade in intermediate services by examining the role of multinational enterprises (MNE) activities associated with bilateral foreign direct investment (FDI). Prior work in production networks (or global value chains [GVCs]) and R&D fragmentation suggests a complementarity relationship between FDI in R&D and technological knowledge flows. The paper examines this proposition empirically for R&D services trade by extending the gravity framework of supply-chain trade for intermediate services with bilateral MNE operations as economic mass variables. The results are partially consistent with the hypothesized complementarity. The econometric strategy accounts for zero trade observations. The latter addresses possible selection and consistency issues of traditional gravity trade specifications, and allows exploring extensive vs. intensive margin of trade. Understanding the role of MNEs in these transactions may be useful for policies aimed at increasing participation and upgrading in MNE-driven GVCs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Intangibles Trade and MNEs: Supply-Chain Trade in R&D Services and Innovative Subsidiaries

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References (77)

Publisher
Springer Journals
Copyright
Copyright © 2017 by This is a U.S. government work and its text is not subject to copyright protection in the United States; however, its text may be subject to foreign copyright protection
Subject
Economics; Industrial Organization; Political Economy/Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-017-0265-0
Publisher site
See Article on Publisher Site

Abstract

This paper contributes to the literature on vertical specialization in R&D (or ‘R&D fragmentation’) and trade in intermediate services by examining the role of multinational enterprises (MNE) activities associated with bilateral foreign direct investment (FDI). Prior work in production networks (or global value chains [GVCs]) and R&D fragmentation suggests a complementarity relationship between FDI in R&D and technological knowledge flows. The paper examines this proposition empirically for R&D services trade by extending the gravity framework of supply-chain trade for intermediate services with bilateral MNE operations as economic mass variables. The results are partially consistent with the hypothesized complementarity. The econometric strategy accounts for zero trade observations. The latter addresses possible selection and consistency issues of traditional gravity trade specifications, and allows exploring extensive vs. intensive margin of trade. Understanding the role of MNEs in these transactions may be useful for policies aimed at increasing participation and upgrading in MNE-driven GVCs.

Journal

"Journal of Industry, Competition and Trade"Springer Journals

Published: Nov 13, 2017

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