Sectoral Productivity Growth and R&D Spillovers in the Netherlands

This paper assesses empirically whether R&D spillovers are important and whether they originate from domestic or foreign activities. Data for eleven sectors are used to explain the impact on total factor productivity of R&D by the sector itself, by other Dutch sectors and by foreign sectors. We find that both domestic and foreign R&D are significant for the Dutch economy. The elasticity of total factor productivity with respect to R&D is approximately 37% for R&D by a sector, 15% for R&D by other Dutch sectors and 3% for R&D by foreign sectors. Our findings suggest moreover that more R&D speeds up the adoption of foreign technologies. Thus, even for a small open economy as the Netherlands, promoting investment in R&D is appropriate as it both stimulates adoption and generates spillovers.     

Occupational Composition Within Multinational Firms: Evidence From Korean Employer-Employee Matched Data

Using Korean employer-employee matched data, we investigate the difference in occupational structure between domestic and multinational firms in manufacturing sectors. The main result shows that the occupational composition of the multinational firms is more skewed toward high-skills and service occupations than domestic firms. Furthermore, we find the heterogeneous labour structure among multinational firms upon types and locations of foreign affiliates. The multinationals that are establishing production plants or locating their affiliates in emerging countries tend to be composed of relatively smaller share of high-skills and service occupations than those with foreign R&D centres or business branch or with affiliates located in advanced countries.     

Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity

How does outward foreign direct investment (FDI) affect employment of multinationals in the home country? Does the impact of outward investment differ among manufacturing and service sectors? Using data on Italian MNEs, this paper examines the impact of Italian outward FDI on local employment between 1998 and 2006. In particular, we investigate the relationship existing between employment in the parent company and employment in foreign affiliates by distinguishing according to host-country location and sector of activity. The results suggest that the effects of Italian outward FDI on domestic employment differ according to the sector and the country of destination. In the manufacturing sector, a weak but significant relationship of labour substitutability is found for Italian MNEs producing low-technology products in foreign affiliates localized in high-wage countries. On the other hand, a significant North–south complementarity relationship in labour demands appears in the High and Medium-high- technology sectors. In the service sector, we find strong complementarity between employment in the parent firm and employment in foreign affiliates: in particular, this regards Italian MNEs producing knowledge-intensive services both in Western affiliates and CEEC locations. These results are robust when we control for endogeneity of output and parent wages.     

Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors

How does outward foreign direct investment (FDI) affect employment and productivity growth in the home country? Does the impact of outward investment differ among manufacturing and service sectors? In this paper we analyze the effects of investing abroad using firm-level data for Italy for the period 2003–2006. We adopt matching techniques in combination with a difference-in-difference estimator in order to investigate the causal effect of becoming multinational on domestic employment and productivity. Preliminary results suggest that Italian outward FDI has limited effects on domestic employment and performance of internationalizing firms on average. However, results significantly differ depending on the sector (manufacturing versus services) where the MNEs are operating. In particular, we find that while in the manufacturing sector, outward FDI tends to strengthen both productivity and, to less extent, employment. In the service sector, we find a negative effect on employment (two years after the investment).     

Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007

As with many developing countries, the Chinese government hopes that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In this paper, we show that foreign investment originating outside of Hong Kong, Macau, and Taiwan has positive effects on individual firm level productivity, while foreign investment from HKMT firms does not. We also test for both horizontal (within the same industry) and vertical (upstream or downstream) linkages from foreign investment. Using a manufacturing firm-level panel for 1998 through 2007, we find zero or weak positive horizontal externalities. However, our results show that foreign direct investment (FDI) has generated positive productivity spillovers to domestic firms via backward linkages (the contacts between foreign affiliates and their local suppliers in downstream sectors) as well as forward linkages (between foreign suppliers and their local buyers in the upstream sectors).     

Market competition,differences in technology,and productivity improvement: An empirical analysis based on Japanese manufacturing firm data

In this paper we examine empirically the effect of market competition on firm productivity improvements using data drawn from the Japanese manufacturing sector. We find that a non-linear relationship between competition and productivity growth induced by R&D activity as suggested by Aghion et al. (2005) holds for Japanese manufacturing firms. We also show that greater market competition widens technology differences across firms, and firms facing more intense competition are more productive than other firms. Our empirical results imply that productivity improvement through R&D activity depends on not only a competitive environment but also technological differences between firms.     

Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects

This paper uses a proportional hazard model to study foreign direct investment by Japanese manufacturers in Europe between 1970 and 1994. We divide each firm’s investment total into a sequence of individual investment decisions and analyze how firm-specific characteristics affect each decision. We find that total factor productivity is a significant determinant of a firm’s initial and subsequent investments. Parent-firm size does not have a significant influence on the initial decision to invest. Large firms simply have more investments than smaller firms. Other firm-specific characteristics, such as the R&D intensity, export share and keiretsu membership, also play a role in the investment process. JEL no. F23, L20     

How do Chinese industries benefit from FDI spillovers?

Recently, Foreign Invested Enterprises (FIEs) in China have increased their investment in not only production activity but also R&D activity. This paper examines the impact of spillovers from such activities by FIEs on two types of innovations by Chinese domestic firms: Total Factor Productivity (TFP) and invention patent application, using comprehensive industry and province-level data. We evaluate such spillovers according to FIEs' ownership structure, the origin of foreign funds and whether they are from the same industry or from other industries. We find an interesting asymmetry between spillovers to TFP and invention patent applications; while we do not find significant intra-industry spillovers from FIEs but find robust inter-industries spillover related to TFP, we find substantial intra-industry spillovers promoting invention patent applications but no evidence of inter-industries spillovers. Furthermore, whereas spillovers from FIEs to Chinese firms' TFP stem from their production activities, the source of spillovers related to invention patent applications is mostly through their R&D activity. Our findings indicate a need for multidimensional evaluation of the role of FDI in developing countries.     

Debt,R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s

Based on a panel data set of Japanese manufacturing firms in research-intensive industries, we investigate quantitatively the extent to which outstanding debt affected firms' R&D activities during the 1990s. We find that massive amounts of outstanding debt had a significant, negative effect on R&D investment during that time. We also find that R&D expenditures were closely linked to firm-level total factor productivity growth over the same period. In fact, a ten-percentage-point increase in the debt–asset ratio lowered the rate of firm-level total factor productivity growth by 0.26 percentage points between 1999 and 2001, because it reduced R&D activities. J. Japanese Int. Economies 21 (4) (2007) 403–423.     

Understanding the role of trade agreements in Indonesia’s FDI

In this paper, we develop the hypothesis that trade agreements influence foreign direct investment (FDI). We extend the conventional model of FDI determinants to accommodate the role of trade agreements. Fitting Indonesian data to this model, we discover strong evidence that, while both bilateral and multilateral trade agreements positively influence Indonesia’s FDI, multilateral agreements have a larger effect. We further distinguish FDI by sector and find sector-specific trade agreements play an active role: these agreements positively influence FDI in the primary and service sectors, but not in the manufacturing sector. We also find that trade agreements positively influence FDI through the export and total factor productivity channels, and less so through the economic growth channel.     

Determinants of privatization in China: The role of the presence of foreign firms

This study investigates how the presence of foreign firms in a sector influences the privatization policy of domestic firms in that sector in China. We consider several variables to proxy for such a presence, from the perspective of the relative production scale, R&D and marketing, and labor productivity. By using the enterprise surveys carried out by the World Bank in 2005 of nearly 12,400 Chinese firms located in over 100 cities, we find that a rise in the presence of foreign firms increases the extent of the private ownership of domestic firms in a nonlinear fashion. Additionally, we apply IV-Tobit estimation with valid instruments and Tobit estimation with lagged key variables to deal with the possible endogeneity in the relationship between the presence of foreign firms and the privatization decision. Empirical evidence supports the main findings.     

Endogenous production of R&D and stable economic development

Summary Changes in production technology are usually a result of R&D efforts. In this paper a model is presented in which technological change emanates from production factors used for R&D. The model consists of two production sectors, one concerned with the production of consumption and investment goods, the other with that of new technologies. By means of this model we analyse the impact of R&D on the level of immediate income and the efficient allocation of production factors over both sectors. Furthermore, the existence of a steady state in this model is examined. It turns out that such a state is only possible under restrictive conditions.     

A general equilibrium analysis of FDI growth in Chinese services sectors

This paper analyzes one of the features of the Chinese economic transition, namely, the impact of foreign direct investment (FDI) accruing to advanced services sectors. To that aim we use an innovative computable general equilibrium (CGE) model that includes, in a multi-regional setting, foreign multinationals operating in monopolistic competition. The model is based on data that split the world economy in 2016 into 11 regions (China - US - EU27 - Great Britain -other advanced economies - India - Japan - South East Asia - Latin America - Middle East - Sub Saharan Africa) and 21 sectors. We provide quantitative evidence on several characteristics of the 21 sectors in China, EU27 and the US, as well as other data on the role of China in the global stage, including its evolution since 2004. Several scenarios focusing on the increase of FDI inflows in services, because of the reduction of its FDI barriers, are simulated deriving short and long run results. We find that the impact of more foreign multinationals in services is positive for China but smaller than the one that had been obtained in other previous studies on FDI in manufactures. This is due to the still limited role of services in the Chinese economy and to a crowding out effect that domestic firms experience after the entry of foreign multinationals. On the whole the impact is, however, slightly positive for China, because manufactures benefit from the entry of foreign services multinationals. The rest of regions are unaffected or benefit very slightly, due to the fact that services production is less export oriented and more devoted to private consumption than in the case of manufactures. However, their manufacturing sectors are slightly harmed by the stronger Chinese competition. Many of them manage to more than offset this latter trend through higher exports or FDI in services directed to China.     

The Impact of Research and Development on Economic Growth and Productivity in the U.S. States

Research and development (R&D) has a large effect on both state output and total factor productivity in the long run. Our estimates for the private sector of the U.S. states from 1963 to 2007 show that the R&D elasticity averages 0.056–0.143. The implied returns to state Gross Domestic Product (GDP) from R&D spending are 82–211%. There are also positive R&D spillovers, with 70–80% of the total returns accruing to other states. We also find that states with more human capital have higher own‐ and other‐R&D elasticities, and those in lowest tier of economic development have the least own‐state R&D elasticity but the highest other‐R&D elasticity. In addition, we find that the positive effect of R&D spillovers across states is larger when we consider R&D spillovers across states based on economic similarity of R&D across sectors.     

Technological factors and total factor productivity in China: Evidence based on a panel threshold model

This study investigates the effects of technological factors, including indigenous research and development (R&D) investments, technology spillovers coming from foreign direct investments, export, and import, on China's total factor productivity (TFP). Using provincial panel data of China, covering 30 provinces over the period 2000–2014, our results confirm that indigenous R&D investments play a leading role in promoting TFP. Linear analysis suggests that, except for export, the technology spillovers through openness are beneficial for TFP growth. However, a further discussion based on a panel threshold model suggests that the different behaviours of these technology spillovers are dependent on the technological absorptive capacity affecting factors, such as human capital and indigenous R&D investments. The human capital will strengthen the spillover effects of each technology spillover. However, R&D intensity initially tends to hamper their spillover effects. Once the R&D intensity exceeds a certain level, the negative spillover effect of export on TFP tends to be alleviated, and the positive spillover effect of foreign direct investment and import on TFP will increase.     

R&D and patenting activities of foreign firms in China: The case of Japan

This study investigates the research and development (R&D) and patenting activities of foreign firms in China. Utilizing a panel dataset of Japanese affiliates during the period 2001–2007, we first examine the determinants of R&D activity and find that local market-oriented firms place more emphasis on R&D, whereas process export-oriented firms are less likely to conduct R&D. Affiliates within a large business group that has more affiliates have a higher propensity to undertake R&D. Using only firms with positive R&D expenditures, we next estimate the patent production function. Results indicate that the patent elasticity of R&D for Japanese affiliates is high, suggesting that they are more productive on patent production than other firms. Moreover, local market-oriented firms do need more patents to protect their products, whereas scientific firms demonstrate a lower willingness to register patents in China.     

Global outsourcing or foreign direct investment: Why apple chose outsourcing for the iPod

A simple model is presented, where a firm's productivity is endogenized by its R&D investment. It shows that the most productive firms may prefer international outsourcing to foreign direct investment (FDI) in industries with a high innovation share. The high innovation share motivates the firms to economize on organizational cost in order to save resources for R&D investment, making outsourcing preferable to FDI because the former incurs a smaller organizational cost. This model helps explain why Apple Inc., belonging to the electronics industry, which has a particularly high innovation share, launched its innovative iPod through international outsourcing instead of FDI.     

R&;D,trade, and productivity growth in korean manufacturing

This paper investigates the effects of both R&D spillovers and trade patterns on productivity in Korean manufacturing, using industry-level data. The results show that domestic and foreign R&D capital stocks played an important R&D in improving the total factor productivity of Korean manufacturing. Moreover, productivity is higher in export industries and the more open industries, and the effects of foreign R&D capital are stronger in the industries with large import shares or large intra-industry trade shares. JEL no. F10, O32, O47.     

Global warming and technical change: Multiple steady-states and policy options

We develop an economic growth model that incorporates anthropogenic climate change and a publicly funded research sector that creates new technologies and simultaneously expands the productivities of existing technologies. Greenhouse gas emissions are affected by R&D activities both negatively, through the increase of output from productivity growth, and positively as new technologies are less polluting. We find that there may exist two different steady-states of the economy, depending on the amount of research spending: one with less new technologies being developed and the other with more technologies. Thus, a lock-in effect can arise that, however, can be overcome by raising R&D spending sufficiently such that the steady-state becomes unique. We derive the combinations of fiscal policy instruments for which that can be achieved and we study the implications for the economy and with respect to emissions. In particular, the double dividend hypothesis may hold under some specific conditions.