Foreign direct investment in R&D and domestic entrepreneurship in China’s manufacturing industries

This paper argues that internationalization of innovation and the related spillovers can also affect the likelihood of firm entry and exit into an industry. By making use of firm-level panel data from China over the period 2005 to 2007, this paper examines the impact of foreign direct investment (FDI) in research and development (R&D) and the related linkages on entry and exit likelihoods of domestic firms in (i) transport equipment and (ii) electrical machinery and equipment manufacturing industries. In order to evaluate the region-of-origin effect, this paper also separately examines the impact of FDI in R&D originating from (i) all countries except Hong Kong, Macau and Taiwan and (ii) Hong Kong, Macau and Taiwan. Furthermore, the impact of FDI in R&D on entry and exit of Chinese firms in the two industries is examined by splitting the data into large and small firms within the two industries. The results of the pooled probit regression reveal that FDI in R&D and the related spillovers can have a significant impact on the likelihood of entry and exit of domestic firms in transport equipment and electric machinery and equipment industries. The empirical analysis also suggests that the impact of changes in FDI in R&D and the related spillovers varies across firm size.     

The interdependence between FDI and R&D: an application of an endogenous switching model to Taiwan's electronics industry

Foreign direct investment (FDI) and research & development (R&D) are mutually dependent and should be treated as endogenous variables in empirical studies. An endogenous switching regression model is used to examine the mutual effect of FDI and R&D in Taiwan's electronics industry. The empirical results show that FDI and R&D are positively related and do reinforce each other. Unbiased coefficients are obtained as they are compared to those estimates if FDI and R&D are treated as exogenous variables. The results have a strong public policy implication for Taiwan's foreign direct investment and can be further used to estimate the difference in R&D expenditures between FDI and non-FDI firms.     

Innovation and productivity in manufacturing and service firms in Catalonia: a regional approach

This article analyses the determinants of research and development (R&D) and the role of innovation on labour productivity in Catalan firms. Our empirical analysis found a considerable heterogeneity in firm performances between the manufacturing and service industries and between low- and high-tech industries. The frontiers that separate manufacturing and service industries are increasingly blurred. In Catalonia high-tech knowledge-intensive services (KIS) play a strategic role in promoting innovation in both manufacturing and service industries, and driving growth throughout the regional economy. Empirical results show new firms created during the period 2002–2004 that have a greater R&D intensity than incumbent firms (54.1% in high-tech manufacturing industries and 68.8% in high-tech KIS). Small and young firms in the high-tech KIS sector are very prone to carrying out R&D and they invest more in innovation projects. R&D expenditures, output innovation, investment in physical capital, market share and export have positive effects on labour productivity in both the manufacturing and service sectors. Firm size, on the other hand, has a positive effect on productivity in manufacturing industries but not in services.     

China’s Outward FDI: An Industry-Level Analysis of Host-Country Determinants

We use disaggregated data by country and industry to empirically analyze the host country determinants of Chinese outward foreign direct investment (FDI) for the years 2003 to 2011. Our results suggest that the host-country determinants of Chinese FDI differ between high- and low-income countries. While all Chinese FDI is invariably market seeking, other motivations stand out for differing sectors in specific country groups. The resource seeking motivation is relevant for manufacturing FDI to high-income countries with relatively high fuel abundance, and to low-income countries with primary resource abundance (other than fuels). Differently, the strategic-asset seeking motivation, measured by the level of R&D spending on GDP, only positively and significantly affects Chinese manufacturing and service FDI to OECD countries, while higher education levels are an attraction factor for all investing firms. Natural resource is an important attraction factor for Chinese FDI, not only in resource-related sectors, but also in manufacturing and service sectors. Finally, Chinese FDI tends to follow exports (rather than foster them), especially in service sectors.     

The Causality between R&D and Productivity in Manufacturing: An international disaggregate panel data study

This study analyses the causality between productivity and domestic and foreign R&D on the basis of panel data with respect to 22 manufacturing sectors in 14 OECD countries during the period 1972-94. A unit root analysis shows that the relation between the log of total factor productivity (TFP) and the logs of domestic and foreign R&D is cointegrated. Causality tests are performed on corresponding dynamic VAR and error correction augmented VAR models, estimated both on the total panel and on 22 sub-panels, sector by sector. Their results show that, although there are feedbacks, both on average and in a clear majority of sectors the causation runs mainly from the R&D variables to TFP rather than the other way round. This causation is, moreover, shown to be, in the first place, long-run in nature. It is concluded that, when considered in conjunction, these results suggest an essentially supply-type rather than demand-pull kind of interpretation of the cointegrating relation between TFP and R&D.     

The productivity impact of R&D investment: are high-tech sectors still ahead?

Our aim is to investigate the relationship between a firm's R&D expenditures and its productivity, looking at sectoral peculiarities. We use a unique longitudinal database consisting of 1809 US and European manufacturing and service firms over the period 1990–2008. Our main findings can be summarised as follows. Consistently with previous literature, the knowledge stock has a significant positive impact on a firm's productivity. More interestingly, the coefficient turns out to be significantly larger in the R&D-user services and high-tech manufacturing sectors than in the non-high-tech manufacturing sectors. Contrary to the ‘latecomer advantage’ approach, these outcomes suggest that firms in high-tech sectors are still ahead in terms of impact on productivity of R&D investments.     

FDI技术溢出渠道与中国制造业生产率增长研究:基于面板数据的分析

This paper analyses total factor productivity (TFP) of China’s manufacturing sector and its decomposed indexes, i.e., technological progress and technological efficiency by employing Malmquist productivity index based on the Data Envelopment Analysis (DEA) approach. Using panel data of domestic manufacturing sector in China from 2000 to 2005, we estimate the influences of horizontal and vertical linkages on TFP and its decomposition indexes by controlling R&D and exports indexes of domestic manufacturing sector. The empirical results show that R&D and exports have a positive effect on TFP and that FDI inflows lead to positive spillovers significantly in general mainly through technological progress resulting from backward linkages; however, forward linkages have no technology spillover effect while horizontal linkages promote TFP through technological efficiency which has quite different influencing modes compared to that of backward and forward linkages. The grouping regression results also show that FDI technology spillovers have different conductive mechanisms under different technological levels, industry concentrations and export dependency indexes. Translated and Revised from Shijie Jingji 世界经济 (The Journal of World Economy), 2008, (8): 20–31     

R&D and foreign direct investment with asymmetric spillovers

This paper analyzes how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, considering different sources of asymmetry such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We show that a better ability to manage knowledge flows incentivizes the firm to invest more in R&D. By introducing geographically bounded spillovers, we also find that one-way foreign direct investment (FDI) stimulates the multinational enterprise to raise its own R&D and that an FDI equilibrium is more likely to occur. Finally, spillovers localization leading to two-way FDI is welfare improving when compared with non-localized spillovers.     

Multinationals,R&D and Endogenous Productivity Asymmetries

We analyze the influence of endogenous productivity asymmetries between firms, in terms of competitiveness and size, on multinational activity. In the model, productivity depends on cost-reducing R&D (research and development). We show that when firms differ on commitment power in R&D, the R&D leader, independently of being a multinational or a domestic firm, tends to invest more in R&D than the R&D follower. Because of these productivity advantages, the R&D leader can more easily become multinational. Therefore, in addition to the proximity-concentration trade-off, we identify another FDI (foreign direct investment) determinant: technological competition.     

Productivity and R&D sources: evidence for Catalan firms

This paper draws on a sample of innovative Catalan firms to identify how two main sources of innovation – internal R&D and external R&D acquisition – affect productivity in the manufacturing and service industries. The sample comprises 1612 innovative firms from the fourth European Community Innovation Survey (CIS-4) during the period 2002–2004. We compare empirical results when applying the usual OLS and quantile regression techniques controlling with a non-parametric sample selection. Our results indicate the different patterns that are attributable to the two sources of innovation as we move up from lower to higher conditional quantiles. First, the marginal effect of internal R&D on productivity decreased as we moved up to higher productivity levels. Second, the marginal effect of external R&D acquisition increased as we moved up to higher productivity levels. Finally, empirical results show significant complementarities between internal and external R&D, which are higher for knowledge-intensive service sectors.     

Determinants of R&D in knowledge-intensive business services firms

Research and development (R&D) is a key factor enabling firms to gather information, create knowledge and innovate. Although often seen as the preserve of goods-producing sectors, knowledge-intensive business services (KIBS) in particular also engage in R&D. In this paper, we are interested in understanding the determinants of R&D in KIBS. We address this question by exploring factors connected to R&D in KIBS, with attention to whether it is connected with internal capabilities or to establishments' openness. We show that KIBS' R&D is associated with internal capabilities, and that recourse to external R&D is part of a strategy of openness that complements internal capacity. We also suggest that KIBS's own view of R&D is aligned with R&D in the goods-producing sector, leading establishments in non-technological KIBS sectors to under-report R&D.     

R&D in Indian manufacturing enterprises: what shapes it?

The article examines the factors influencing research and development (R&D) in manufacturing entities. Using data on a large sample of companies for the period 1995–2007, the finding indicates that large companies have a higher probability of pursuing R&D, although with lower intensity. In terms of magnitudes, a 10% increase in firm size raises R&D intensity by roughly 0.6%. Both the intensity and the probability of undertaking R&D initially declines for older firms. Outward orientation, and especially foreign currency earnings, has a significant bearing on R&D efforts. R&D efforts are also found to vary significantly across firm ownership.     

GENERAL PUBLIC LICENSING AND THE INTENSITY OF AGGREGATE SOFTWARE DEVELOPMENT

We develop a theoretical model in which the sophistication of technologies improves over time due to research and development (R&D) undertaken by software developers in two sectors. In the commercial sector, R&D intensity is driven by economic incentives, whereas in the sector using the General Public License (GPL), it is driven by the preference-based labor supply of individuals. A higher amount of GPL labor allocation generates equilibrium effects that adversely affect commercial software development. When the degree of imitation in the GPL sector is relatively higher than in the commercial sector, or the commercial sector has increasing returns of a limited degree, the R&D intensity in the commercial sector would decline by more than any increases in R&D intensity in the GPL sector. Thus, aggregate R&D intensity in the long run would be reduced. Numerical simulation indicates that this outcome pertains under realistic parameter ranges.     

R&D and productivity growth: Evidence from the UK

Although the econometric evaluation of R&D has attracted wide interest in many countries, it has not attracted much in the UK. The main objective of this paper is to fill this void, i.e., to estimate the impact of R&D on productivity growth of the UK manufacturing sector. However, there are some additional objectives. Firstly, we estimate the impact of R&D on productivity growth of large and small firms and we discuss a number of theoretical arguments regarding the role of firm size. Secondly, given that the technological infrastructure influences the innovative capacity of a firm, we compare the impact of R&D on productivity growth of high-tech firms with the corresponding impact on productivity growth of low-tech firms. Thirdly, we investigate whether the contribution of R&D to productivity growth has changed over time.

Based on firm-level data (78 firms, 1989–2002), we find that the contribution of R&D is approximately 0.04. Although the R&D-elasticity of large firms (0.044) is higher than the corresponding elasticity of small firms (0.035), the difference is small. In contrast, the R&D-elasticity is considerably high for high-tech sectors (0.11), but statistically insignificant for low-tech sectors. Finally, the investigation of the elasticity of R&D over time revealed an interesting discontinuity showing that although until 1995 the R&D-elasticity was approximately zero, after 1995 it increased dramatically to 0.09. We investigate the potential causes of such non-linearity and we suggest a number of possible explanations.     

How much horizontal innovation is consistent with vertical innovation?

R&D-driven growth theory emphasizes vertical and horizontal innovation activities for long run growth. In this paper, we show that the real world co-existence of both innovative activities restricts the admissible laws of motion for horizontal innovation, thereby allowing to test the admissible range of intertemporal horizontal R&D spillovers. Private arbitrage between manufacturing and vertically innovating makes quality improving R&D profitable if and only if the horizontal innovation rate does not exceed the population growth rate. Hence, the mere observation of positive vertical innovation suggests that the number of new sectors has not been increasing faster than population.     

R&D,productivity, and exports: Plant-level evidence from Indonesia

This study examines the relation between productivity and exports in Indonesian manufacturing firms by taking account the endogenous choice of R&D. We first examine the determinants of R&D activity and find that exporting activity contributes positively to plants' R&D activity, while multinational corporate do not have a higher R&D propensity. The simultaneous estimates on the interrelation of R&D, productivity, and export show that R&D has a positive impact on both productivity and exports, suggesting the importance of R&D to Indonesian economic growth. It suggests also a two-way causality between productivity and exports, implying the coexistence of self-selection and learning-by-exporting effects in Indonesian manufacturing sector.     

Knowledge spillovers,absorptive capacity and total factor productivity in China’s manufacturing firms

Applying the stochastic frontier framework, this study explores the diffusion and absorption of technological knowledge in China’s manufacturing firms, based on a panel of more than 10,000 local and foreign-invested firms over the period 1998–2001. Our empirical approach allows us to distinguish between technological progress (TP) and technical efficiency (TE) in analysing whether R&D, exports and the presence of foreign direct investment simultaneously enhance TP through knowledge spillovers in a single framework and whether different types of domestic absorptive capacity moderate external knowledge spillovers in relation to TE. The results show that there are positive inter-industry productivity spillovers from R&D and foreign presence, whereas evidence of intra-industry productivity spillovers from FDI to Chinese firms is less robust. We find evidence that absorptive capacity is one of the key determinants to quantitatively explain intra-industry differences in productivity of local Chinese firms. The findings have important policy implications.     

A new approach to estimation of the R&D–innovation–productivity relationship

ABSTRACT

We apply a generalized structural equation model approach to the estimation of the relationship between R&D, innovation and productivity that focuses on the potentially crucial heterogeneity across sectors. The model accounts for selectivity and handles the endogeneity of this relationship in a recursive framework which allows for feedback effects from productivity to future R&D investment. Our approach enables the estimation of the different equations as one system, allowing the coefficients to differ across sectors, and also permits us to take cross-equation correlation of the errors into account. Employing a panel of Swedish manufacturing and service firms observed in three consecutive Community Innovation Surveys in the period 2008–2012, our full-information maximum likelihood estimates show that many key channels of influence among the model's components vary meaningfully in their statistical significance and magnitude across six different sectors based on the OECD classification on technological and knowledge intensity. These results cast doubt on earlier research which does not allow for sectoral heterogeneity.     

The relationship between international financial reporting standards,carbon emissions,and R&D expenditures: Evidence from European manufacturing firms

This study examines the impact of research and development (R&D) expenditures on carbon dioxide (CO2) emissions prior to and under the mandatory adoption of International Financial Reporting Standards at the firm level within the manufacturing sectors of three European countries, i.e. Germany, France and the U.K. Estimation of a threshold autoregressive model using quarterly data from 1998 to 2011 reveals that in the post-IFRS mandatory adoption year R&D expenditures show a reduction in CO2 emissions to firms, i.e. rising CO2 abatement. This is likely due to the presence of incentives provided by the new accounting disclosure regime. Our results remain robust in terms of a sector analysis, firm size, and the introduction of the European Union Emission Trading Scheme (EU-ETS) across the three countries.     

The productivity effects of local R&D outsourcing: the moderating role of subsidiary mandate and internal R&D

This study examined the moderating effects of two kinds of internal R&D (parent R&D and subsidiary R&D) on the relationship between local R&D outsourcing and subsidiary productivity as internal R&D challenges the collaborative relationships in the local environment. Due to the specific feature of a subsidiary mandate, we further investigate whether two distinct kinds of internal R&D have different moderating effects between exploitation-oriented subsidiaries and exploration-oriented subsidiaries, based on a sample of longitudinal data set of 263 Taiwan-based manufacturing subsidiaries over the period 2006–2009. The empirical results show that for exploitation-oriented subsidiaries parent R&D plays a significant and negative moderating role on the impact of local R&D outsourcing based on local collaboration, while a positive moderating role is observed with parent R&D and subsidiary R&D for exploration-oriented subsidiaries.