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Innovation in Tow: R&D FDI and investment incentives

Published online by Cambridge University Press:  20 January 2017

Rachel L. Wellhausen
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Abstract

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Multinational corporations (MNCs) increasingly internationalize research and development (R&D), but the distribution of foreign direct investment (FDI) in R&D differs from that of general FDI. I use data on US MNC affiliates’ investments abroad (2001–2008) to demonstrate that increasing value added predicts more future R&D FDI, as R&D FDI is an upgrade decision. I then use data on R&D investment incentives to show that, while governments spend resources on R&D incentives, these can be negative predictors of R&D FDI. The findings imply that government efforts are best directed at incremental encouragement of value-added activities, as efforts to jump to R&D FDI are misguided.

Type
Research articles
Information
Business and Politics , Volume 15 , Issue 4 , December 2013 , pp. 467 - 491
Copyright
Copyright © V.K. Aggarwal 2013 and published under exclusive license to Cambridge University Press 

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