R&D Theory

8/13/2019 R&D Theory

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e

R&D and technology spilloversvia FDI:Innovation and absorptivecapacity

Yuko Kinoshita

CERGE-EI, CEPR and WDI

November 2

Abstract

!"o #a$es o# R%D &innovationand 'earnin() and te$hno'o(*

s+i''overs #rom DI orei(n dire$tinvestment) on a rm.s +rodu$tivit*

(ro"th are e/amined in this+a+er0

1sin( rm-'eve' +ane' data on Ce$h manu#a$turin( rms bet"een

3445 and 3446, I nd that7

&i) the 'earnin( effe$t o# R%D is #ar more im+ortant than the

innovative effe$tin e/+'ainin( the +rodu$tivit* (ro"th o# a rm,

&ii) there is no eviden$e o# te$hno'o(* s+i''overs to 'o$a' rms #rom

havin( a #orei(n 8ointventure+artner,

&iii) +ositive s+i''overs #rom DI are #ound in e'e$tri$a'

ma$hiner* and radio%!9 se$tors, "hi$h are a'so a$tive investors

in innovative R%D0

Corres+onden$e7 *uko0 k in o s h ita : $er ( e0$ un i0$0 I thank ;an Kmenta, ;an i(i$ and +arti$i+ants at CEPR?WDI @nnua' Con#eren$e on

!ransition E$onomies in Aos$o" #or $omments and Aura'i Parsa at the Ce$h


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Bffi$e #or +rovidin( the data0Wi''iam Davidson Institute, 1niversit* o# Ai$hi(an =usiness


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1 Introduction

!he a$$umu'ation o# kno"'ed(e is one o# the ke* determinants #or the e$o-nomi$ (ro"th o# a $ountr*0 !he sto$k o# kno"'ed(e or te$hno'o(* $an bein$reased b* de'iberate investment in R%D $a+ita' or b* the diffusion o#

e/- istin( te$hno'o(*0 Innovations (enerated b* R%D a$tivities andte$hno'o(* s+i''overs #rom the sto$k o# kno"'ed(e are both im+ortant inenhan$in( rms.+rodu$tivit*as "e'' as bein( $'ose'* re'ated to ea$h other0

!his +a+er studies the effe$ts o# both R%D investment and te$hno'-

o(* s+i''overs #rom #orei(n dire$t investment &DI) on a rm.s +rodu$tivit*(ro"th0 I +a* s+e$ia' attention to the t"o #a$es o# R%Dinnovation

andFabsor+tive. or F'earnin(. $a+a$it*Eas Cohen and evintha' &3464) +ro+ose0!hat is, R%D not on'* stimu'ates innovation but a'so deve'o+s the rm.s

abi'it* to identi#*, assimi'ate, and e/+'oit outside kno"'ed(e0 !his se$ondro'e o# R%D is $onsidered tobe ver* im+ortant +arti$u'ar'* #or assessin( the

e/tent o# te$hno'o(* s+i''overs #rom others0 !e$hno'o(* diffusion is notan automati$ $onseHuen$e #rom the +resen$e o# others. kno"'ed(e sto$k0 Ita'so reHuires that the re$i+ient+ossesses the abi'it* to absorb and ado+tthete$h- no'o(* and that R%D a$tivities "i'' he'+ in$rease the in$iden$e o#te$hno'o(* s+i''overs b* enhan$in( the rm.s absor+tive $a+a$it*0

In this stud*, R%D affe$ts the +rodu$tivit* (ro"th o# rms via t"o

$hanne's0 irst, it dire$t'* in$reases the te$hno'o(* 'eve' b* addin(more ne" in#ormation &innovation)0


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$ommer$ia''* obtainedb* 'i$ensin( a(reements0 JEaton and Kortum&344)M2!here are #our $hanne's throu(h "hi$h te$hno'o(* s+i''s over #rom #orei(n to 'o-

$a' rms7 &3) demonstration-imitation effe$ts, &2) $om+etition effe$ts, &) #orei(n'ink-

O


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in human $a+ita' "hi$h "ou'd not be trans#erred other"ise30 @'so in the

theoreti$a' 'iterature o# te$hno'o(* trans#er #rom #orei(n to domesti$ rms,Wan( and ='omstrom &3442) +oint to the im+ortan$e o# the 'earnin(

efforts or the absor+tive $a+a$it* o# host $ountr* rms in in$reasin( therate o# te$hno'o(* trans#er0

In the em+iri$a' studieso# te$hno'o(*diffusion via DI, the eviden$e israther mi/ed des+ite its +remise o#+otentia' (ains #rom DI +arti$u'ar'*atthe rm- and +'ant-'eve's0 or e/am+'e, addad and arrison &344) and

='omstrom and


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a(e effe$ts, and &O) trainin( effe$ts0


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se$tion O0 ina''*, se$tion 5 $on$'udes m* ndin(s0

2 Framewor

2!1 R&D and productivitygrowth


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!hat is, R%D $a+ita' sto$k at time t is the sum o# a'' +ast R%De/+endituresVE

tRk and de+re$iated R%D $a+ita' at time t-3 "here U

kis a

distributed 'a( and is a rate o# obso'es$en$e o# R%D $a+ita'0 or the

rst term in &O), I need to s+e$i#* the 'a( stru$ture0 &e0(0 R%De/+enditures in timet-

6


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$onstitute the in$rease in R%D $a+ita' at time t0) In the 'iterature, +eo+'eo#ten use the avera(e 'a( and U

kQ 3 i# k Q and U

kQ i# k Q 0 &O)

thenbe$omes7

RtQ E

tT &3 )R

tR1

&5) !he rate o# obso'es$en$e o# R%D $a+ita', , is some"hat simi'ar to

the

rate o# de+re$iation o# +h*si$a' $a+ita'0 !he main differen$e is, ho"ever,that R%D $a+ita' a'so de+re$iates as kno"'ed(e diffuses to +eo+'e otherthan the innovator0 !he estimation o# reHuires some in#ormation on

+atent rene"a' data0$

In the absen$e o# +atent rene"a' data, it is not+ossib'e to estimate a series o# R%D $a+ita' sto$k dire$t'*0 Bne "a* toderive the rate o# return on R%D investment"ithoutestimatin(the rate o#obso'es$en$e is to assume that is sma'' enou(h0 I# is $om+uted as aninverse o# the 'en(th o# time a +atent (enerates ro*a't* revenue as in Gotoand


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2!2 (echnology spillovers )rom FDI and

productivity growth

@nother #o$us o# this ana'*sis is DI as an en(ine o# the+rodu$tivit*(ro"tho# a rm0 orei(n investment $an be $onsidered here as the inSo" o#

advan$ed kno"'ed(e #rom #orei(n rms0 In +arti$u'ar, amon( man* $hanne's

throu(h "hi$h #orei(n kno"'ed(e s+i''s over to a $ountr*, DI is one o# the

most effe$tive #orms o# internationa' te$hno'o(* trans#er be$ause DI $an

$onve* not on'* te$hno'o(* embodied in (oods and servi$es but a'sointan(ib'e assets su$h as mana(eria' ski''s that "ou'd not be trans#erredthrou(hother avenues0

@t the rm 'eve', 'o$a' rms in the host $ountr* $an benet #rom DI

via rou(h'* #our $hanne's0* irst, #orei(n te$hno'o(* embodied in DI $anbe trans#erred #rom #orei(n to 'o$a' rms as 'o$a' rms imitate "hat #orei(n

rms do0 irms investabroad in order to e/+'oit rm-s+e$i$ $a+abi'ities andthe* are thus t*+i$a''* $hara$teried as effi$ient rms that +ossessintan(ib'e assets0


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I dene on'* rms "ith #orei(n ma8orit* shares as #orei(n-o"ned rms &e0(0

rms "ith BRGNit

Q 3)0!he se$ond variab'e is BR

8,i-t

,"hi$h +ro/ies #orei(n +resen$e in the se$-

tor measured as the share o# em+'o*ment b* #orei(n-o"ned rms totota'

em+'o*ment "ithin the industr*0 Name'*, BR8,i-t

denotes se$tora'

#orei(n sto$k at time t in the 8 th industr* to "hi$h the i th rm be'on(s0!his variab'e is $onsidered to reSe$t the de(ree o# intra-industr* te$hno'o(*s+i''overs #rom DI0

=

!hese t"o variab'es are in$or+oratedintoO=it

0it

O=it

1

Q U BRGNT U BR T d T d &6)

=it

it 2 8,i-t 8 t

"here d8

is a se$tora' dumm* and dt

is a *ear dumm* to $ontro' #or $ross-

se$tiona' and time-series differen$es0


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$ountries0 !he* indeed


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nd eviden$e that R%D not on'* stimu'ates innovation but a'so #a$i'itates

the imitation o# others.dis$overies0.

!he $urrent stud* a'so addresses this issue b* re'atin( R%D to the sieo# te$hno'o(* s+i''overs0 !hat is, the R%D variab'e affe$ts via t"o$hanne's0 Bne is throu(h a dire$t $hanne' &) and the other is throu(h the

absor+tive $a+a$it* &U1

and U2)01. EHuation &3) is e/tended into the

#o''o"in( #orm7

OYit Q T

Oit T

&3

)

OKit T

E

it T U

BRGN

1

T U BR

Yit

it

Eit

K

it

Eit

Yit

it 2 8,i-t

TU3

&

YY

it

) BRGNit

T U$

&

it

) BR8,i-t

T d

8

T dt

T it

&33)

3 Data

!"o data sets are used #or this stud*0 =oth data sets are $o''e$ted b*

the Ce$h


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and other trans+ort eHui+ment re$eive the 'east DI in our sam+'erms0 R%D +ro+ensit* a'so varies but to a 'esser de(ree0 Bther trans+ort

eHui+- ment, radio%!9, and motor vehi$'e e/hibit hi(her R%D

+ro+ensit* than other se$tors0Note that there is no $'ear $orre'ation bet"eenR%D +ro+ensit* and #or-

ei(n +resen$e0 I# R%D +ro+ensit* im+'ies a 'eve' o# te$hno'o(i$a'$om+'e/it*in the se$tor, then DI in the Ce$h Re+ub'i$ is not ne$essari'* (oin( into'o"-te$h se$tors "ith 'o" R%D intensit*0 Aotor vehi$'e is an e/$e+tionsin$e it is re'ative'* more R%D intensive and re$eives a 'ot o# DI as "e''0

3!1 /omparisons between )oreignand local )irms@ +remise o# this stud* is that #orei(n rms are more te$hno'o(i$a''* ad-

van$ed than 'o$a' rms0 @s te$hno'o(* s+i''s over #rom #orei(n to 'o$a' rms,

'o$a' rms ado+t the ne" methods o# +rodu$tion or mana(ementresu'tin( in hi(her +rodu$tivit*0

!he rstt"o$o'umns in tab'e2 re+ortthe avera(e !P 'eve's $om+uted

#or ea$h se$tor and o"nershi+ $'assi$ation &'o$a' and #orei(n rms)0 In man*

se$tors, I observe hi(her+rodu$tivit* 'eve's #or #orei(n rms0 !he e/$e+tionsare te/ti'e, $hemi$a', ma$hiner*, medi$a' eHui+ment, and other trans+orteHui+ment0 @s tab'e 3 indi$ates, te/ti'e, ma$hiner*, and other trans+ort

eHui+ment have ver* 'itt'e #orei(n +resen$e and the avera(e o# #orei(n rmsma* not be treated as re+resentative due to too #e" observations0 Ko"ever,#orei(n +resen$e is 'ar(e enou(h and a$$ounts #or 33X inboth $hemi$a' and

medi$a' eHui+ment se$tors0 In these t"ose$tors, #orei(n rms are re'ative'*

'ess effi$ient than 'o$a' rms0 !his ndin( (oes a(ainst the +remise o# thesu+eriorit* o# #orei(n te$hno'o(*0 Bne e/+'anation#or this is that 'o$a' rmshad a'read* $au(ht u+ in te$hno'o(* and sur+assed #orei(n rms +rior to

34450

!he 'ast $o'umn in tab'e 2 sho"s the differen$es b* se$tor bet"eenthe avera(e !P (ro"th rates #or #orei(n rms and that #or 'o$a' rms0Positive numbers im+'* that #orei(n rms (re" #aster than 'o$a'$ounter+arts on avera(e0 Ne(ative numbers im+'* that 'o$a' rms (re"

#aster than #orei(n

man) in rubber% +'asti$,and Aatsushita &;a+anese) and


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!ab'e 37 @nnua' avera(e o# R%D to va'ue-added and #orei(n

em+'o*ment share b* se$tor &3445-3446)

R%D ? Y orei(n em+'o*mentshare

#ood 03 0te/ti'e 0 0

"ood %+a+er 0 0

$hemi$a' 03 0

rubber %+'asti$ 035 0

non-meta''i$ minera' 034 0

basi$ meta' 05 0

#abri$ated meta' 06 0

ma$hiner* 02 0

e'e$tri$a' ma$hiner* 03 0

radio%!9 0L 0

medi$a' eHui+ment 035 0motor vehi$'e 022 0

other trans+ort eHui+ment 06 0

other manu#a$turin( 0 0

@ 03 0


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rms on avera(e0 !here is no observation #or #orei(n rms in some se$tors

and in thesese$torsthe !P (ro"thdifferen$e is notavai'ab'e0

!he +i$ture here 'ooks different #rom "hat I sa" in !P 'eve'

$om+ar- isons0 orei(n rms do not ne$essari'* (ro" #aster than 'o$a'rms on avera(e0 Combinin( the in#ormation on (ro"th rate "ith thein#ormation on+rodu$tivit* 'eve's, there are #our $ate(ories in "hi$h I $an$'assi#* se$tors0

In the rst(rou+ & #ood, non-meta''i$ minera', and other manu#a$turin(),

#orei(n rms are more +rodu$tive and a'so $ontinue to (ro" #aster than 'o$a'rms0 In the se$ond (rou+ &e'e$tri$a' ma$hiner* and radio%!9), #orei(n

rms are more +rodu$tive but 'o$a' rms are $at$hin( u+ "ith them0 Bn

the $ontrar*, in the third (rou+ &te/ti'e), 'o$a' rms are more +rodu$tive but#orei(n rms are $at$hin( u+0 ina''*, in the 'ast (rou+ &$hemi$a',

ma$hiner*, medi$a' eHui+ment, and other trans+ort eHui+ment), 'o$a' rmsare more +rodu$tive and (ro" #aster than #orei(n $ounter+arts0 or the

remainin( se$tors, thereis no differen$e in !P (ro"th bet"een #orei(n and

'o$a' rms, or, the (ure is not avai'ab'e due to 'a$k o# #orei(nobservations0 I"i'' not dis$uss these non-(rou+ed se$tors here0

!he most interestin( $ase is the se$ond (rou+0 In e'e$tri$a' ma$hiner*

and radio%!9, the su+eriorit* o# #orei(n te$hno'o(* is observed and so isthe +resen$e o# te$hno'o(i$a' $at$h-u+ b* 'o$a' rms0 !here seem to beindeed some +ositive +rodu$tive s+i''overs to 'o$a' rms #rom DI in this

$ase0 Bn the other hand, in the rst (rou+ ood, non-meta''i$ minera',and other manu#a$turin(), 'o$a' rms #ai'ed to benet #rom the +resen$e o#

#orei(n advan$ed te$hno'o(*0 ina''*, in the 'ast t"o (rou+s, the absen$e

o# the te$hno'o(i$a' su+eriorit* o# #orei(n rms is sim+'* inter+reted as a'a$k o# enou(h in#ormation due to 'itt'e #orei(n +resen$e in these se$tors0

In the ne/t se$tion, I attem+t to e/amine various #a$tors that made a

differen$e bet"eendomesti$rms in the rst and se$ond (rou+s in"hether

or not the*$au(htu+ "ith#orei(n rms0

3


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!ab'e 27 @vera(e !P 'eve's and !P (ro"th differen$es b* se$torand o"nershi+&3445-3446)

!P 'eve'

o$a' rms orei(n rms

!P (ro"thdifferen$e

#ood 0 0te/ti'e [0I [ 0"ood %+a+er 02 0 E

$hemi$a' 03 0 -

rubber %+'asti$ -032 0

non-meta''i$ minera' 032 0 0

basi$ meta' 0L 0 E

#abri$ated meta' 0O 0 ma$hiner* -03 - -

e'e$tri$a' ma$hiner* 0L 0 -

radio%!9 -032 30 -medi$a' eHui+ment -05 - -

motor vehi$'e -03L 0 other trans+ort eHui+ment -03 - -

other manu#a$turin( -0O 0 0@ -02 0

34

Notes7

&3) ! P 'eve' Q 'n 9 @ k

'n K '

'n 0&2) ! P (ro"th differen$e Q &avera(e !P (ro"th rate)

#orei(n

&avera(e !P (ro"th rate)domes0

3L


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$ 0stimationResults

!ab'e +resents the resu'ts o# B< re(ressions "ith innovative R%D and t"o

#orei(n variab'es0 !he de+endentvariab'e is 'nYit

Y

itR1

0 !he $oeffi$iento# R%D

measures the a dire$t im+a$to# R%D investmenton+rodu$tivit*(ro"th andI $a'' it here innovative R%D as o++osed to absor+tive R%D0 !he $oeffi$ient o# R%D isa'so the rate o# return to R%D investment0 @'' re(ressions in$'ude the inter$e+t and the$han(es o# $a+ita' and 'abor0

BRGN and BR are the variab'es that re+resent s+i''overs "ithin the rm and

"ithin the industr*, res+e$tive'*0 BRGN is a #orei(n o"nershi+ dumm* and, i# #orei(n8oint venture has an* effe$t on +rodu$tivit* (ro"th, I "ou'd e/+e$t it to be +ositive0

!his variab'e reSe$ts the demonstration effe$t and +ossib'* in$'udes the 'inka(e andtrainin( effe$ts o# te$hno'o(* s+i''overs #rom DI013 BR is a +ro/* #or #orei(n +resen$ein the industr* measured as the em+'o*ment share o# #orei(n rms to that o# a'' rmsinthe industr* and main'* reSe$tsdemonstration and $om+etition effe$ts0

Co'umn I re+orts the resu't "ithout se$tor dummies0 !he rate o# return to R%Dinvestment is 03 at 3X 'eve' o# si(ni$an$e0 !his im+'ies that one more unit o# R%D,in this $ase, one more C>K s+ent on R%D "i'' 'ead to an in$rease o# out+ut b* 03X0!hus, R%D investment indeed $ontributes to the (eneration o# ne" kno"'ed(e but the

rate o# return is 'o"er than that in the studies done in other $ountries01$ !he si(ni$an$eo# R%D remains robust throu(hout re(ressions in tab'e 3 a#ter in$'udin( se$tor andtimedummies0

!he resu'ts #or #orei(n variab'es are some"hat disa++ointin(0 BRGN $arries ane(ative si(n throu(hout re(ressions, a'thou(h not statisti$a''* si(- ni$ant0 !he effe$to# BR is +ositive as I e/+e$ted0 =ut the sie o# the $oeffi$ient is 'essened as I

$ontro' #or se$tor and timedifferen$es01%

@ ('an$e at tab'e indi$ates that there is no eviden$e o# te$hno'o(* s+i''overs #romDI on$e I in$'ude the rm.s R%D investment in the mode'0


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!ab'e 7 Innovative R%D and DI

I I I

R%D?Y 0

30

0

BRGN -0 -0L -0L

&0L) &0L) &0L)

BR 0 02 02

&034) &0O5) &0)

se$tor dummies time dummies

N

n

o

*

es

*

es

ad8usted R2

03L4 03LO 03L3

Notes7

&3) De+endentvariab'e Q Chan(e in 'o( o# va'ue-added0

&2) Inter$e+t,$han(es in $a+ita' and 'abor are in$'uded in re(ressionsbut is not

re+orted here0

&) Parentheses are standard errors0,,

and

indi$ate 3X, 5X

and 3X si(ni$an$e 'eve's, res+e$tive'*0


20/30

!he 'imited im+a$t o# #orei(n investment is re+orted b* other authors in rm- and+'ant-'eve' studies0 1sin( t"o variab'es simi'ar to BRGN and BR, addad and

arrison &344) nd no +ositive effe$ts o# these variab'es on +rodu$tivit* (ro"th0

@itken and arrison &3444) nd a +ositive effe$t o# the #orei(n8oint venture variab'ebut a ne(ative effe$t o# #orei(n sto$k in the industr*0 Kokko &344O) e/amines the effe$t

o# #orei(n +resen$e "ithin the industr* on 'abor +rodu$tivit* and $on$'udes that

te$hno'o(* s+i''overs are #ound on'* in se$tors in "hi$h te$hno'o(* (a+sbet"een #orei(nand 'o$a' rms are not too 'ar(e0 Aore re$ent'*,='omstromand


21/30

a++ro+riate'*0


22/30

!ab'e O7 Innovative and absor+tive R%D and DI

I I I

R%D?Y 0 06 03&06) &033) &033)

BRGN 02 -05 0O

&06) &0L) &06)

BR 025 -034 -036

&0O5) &0OL) &0OL)

&R%D?Y)]BRGN -066

&0OO)

E -04O

&0OO)

&R%D?Y)]BR E 02

02O

&0L4)

se$tordummies *es * *

time dummies no nN LO L LO

ad8usted R2 03L6 03625 0365

Notes7


&2) Inter$e+t,$han(es in $a+ita' and 'abor are in$'uded in re(ressionsbut are not

re+orted here0

&) Parentheses are standard errors0,,

and

indi$ate 3X, 5X



23/30

!ab'e 57 o$a' and #orei(n rms

o$a' orei(n

R%D?Y 0 0&033) &0)

BR -025 033

&06) &0O)

&R%D?Y)\BR 0 -02

&06) &0I64)

time dummies n n

N N N

ad8usted R2 03L6 06O

Notes7


&2) Inter$e+tand $han(es o# $a+ita' and 'abor are in$'uded in

re(ressions0

&) Parentheses are standard errors0

and

indi$ate 5X



24/30

!ab'e 7 Non-o'i(o+o'isti$ and o'i(o+o'isti$ se$tors

non-o'i(o+o'isti$ o'i(o+o'isti$

R%D?Y -0I 0&03 &03

BRGN -0 0

&03 &03

BR -0 0

&0 &06

se$tor dummies ntimedummies

N 6 N

ad8usted R2 02IN

032

Notes7


&2) Inter$e+tand $han(es o# $a+ita' and 'abor are in$'uded in

re(ressions0

&) Parentheses are standard errors0

and

indi$ate 5X


&O) Non-o'i(o+o'isti$ se$torsQ#ood,non-meta''i$minera', others B'i(o+o'isti$

se$torsQe'e$tri$a'ma$hiner*, radio%!90


25/30

there e/ist #orei(n rms eHui++ed "ith su+erior te$hno'o(*0 =ut "hat made the

differen$e in the out$ome o# 'o$a' rms.+rodu$tivit*^

!he ans"er to this Huestion $an be #ound easi'* in tab'e 0 or (rou+ 2 in $o'umnII, R%D investment has a substantia' $ontribution to +rodu$tivit* (ro"th0 !e$hno'o(*s+i''overs #rom #orei(n sto$kin the industr* are +resent and the sie o# the $oeffi$ientis

'ar(e0 or (rou+ 3, the rate o# return to R%D is even ne(ative and there are natura''*

no s+i''overs0

or 'o$a' rms to narro" the te$hno'o(* (a+, #orei(n +resen$e a'one is not enou(h to

(uarantee the in$iden$e o# te$hno'o(* s+i''overs0 an( &2) ar(ue that a rm has to enter theR%D ra$e b* en(a(in( in R%D, rst o# a'', in order to benet #rom s+i''overs #rom

riva' rms in resear$h 8oint venture0 It is natura' to assume that these strate(i$in$entives are stron(er in an o'i(o+o'isti$ market su$h as e'e$tri$a' ma$hiner* and

radio%!9 than #ood, non-meta''i$, and others0

% /onclusion

1sin( un+ub'ished rm-'eve' data on the Ce$h manu#a$turin( se$torbe- t"een 3445and 3446, I e/amined the im+ortan$e o# the rm.s R%D and te$hno'o(* diffusion #rom

DI in e/+'ainin( +rodu$tivit* (ro"th0 In the ana'*sis, I distin(uish the t"o ro'es

o# R%D7 innovation and in$reasin( the absor+tive $a+a$it*0!he annua' rate o# return on R%D investment #or +oo'ed sam+'es is es- timated as

rou(h'* around X0 Bn$e I in$'ude the 'earnin( effe$t o# R%D investment in the

mode', the dire$t effe$t o# R%D on +rodu$tivit* (ro"th


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be$omes insi(ni$ant0 =oth #orei(n8ointventure &BRGN) and #orei(n+resen$e in the

se$tor &BR) are #ound to have no si(ni$anteffe$ton the(ro"th o# +rodu$tivit*0 =uton'* "hen BR is intera$ted "ith R%D does it have a +ositive and si(ni$ant effe$t0

!his im+'ies that the indire$t effe$t o# R%D via the deve'o+ment o# the absor+tive

$a+a$it* is #ar more im+ortant than the dire$teffe$to# innovative R%D in in$reasin(

+rodu$tivit* (ro"th o# the rm, and that R%D and intraindustr* s+i''overs #rom DI(o hand in hand0

!he other im+ortant ndin( is that the rate o# te$hno'o(* s+i''overs #rom DI varies(reat'* a$ross se$tors0 In o'i(o+o'isti$ se$tors su$h as e'e$tri$a' ma$hiner* and radio%!9,there e/ists a si(ni$ant rate o# s+i''overs #rom havin( a 'ar(e #orei(n +resen$e0 @'so,R%D investment has a hi(her rate o# return in these se$tors0 Bn the other hand, 'ess

o'i(o+o'isti$ se$tors su$h as #ood and non-meta''i$ minera' sho" no eviden$e o#s+i''overs des+ite the 'ar(e +resen$e o# #orei(n investors in thesese$tors0

=ased on these resu'ts, severa' +o'i$* im+'i$ations $an be dra"n0 irst,

#or the host $ountr* to ma/imie the de(ree o# te$hno'o(* s+i''overs #rom DI, thehome $ountr* rms shou'd en(a(e in R%D investment in order to enhan$e theirabsor+tive$a+a$it*0 !hus, R%D subsidies or ta/ breaks shou'dbe a$$om+anied b* the+romotion o##orei(n investment0


27/30

Appe

ndi!Data description!he rst sour$e o# the data used in this stud* is the rm-'eve' surve*data dra"n #rom Huarter'* ba'an$e sheets and in$ome statements &O observations)0 !hese$ond sour$e is annua' R%D data that $onsists o# 33L5 observations0 @#ter mer(in( the t"o

b* rm identier and *ear and $ountin( on'* those that are in both data sets, thenumber o# observations dro+s to

4450 E/$'udin( those "ithout o"nershi+ in#ormation and industr* $'assi$a-

tion, it dro+s #urther to 4340 !he $ombined data $ontains the in#ormation on $a+ita'sto$k, $a+ita' investment, number o# em+'o*ees b* t*+e, tota' sa'es, out+ut, va'ue-added,deSators, o"nershi+ $'assi$ation, and R%D e/+endi- tures0

irms "ith #orei(n o"nershi+ are either "ho''* or +art'* #orei(n-o"ned0

!he resto# the rms are dened as 'o$a''*-o"ned rms0 @mon( 'o$a' rms, the ma8orit*is +rivate'*-o"ned rms0 Durin( the +eriod o# 3445-344L, there "ere #e" $han(es ino"nershi+ $'assi$ation amon( sam+'e rms0

@$$ordin( to the 2-di(it I


28/30

Re)erences

J3M Aiten ! and A! 3arrison, @re there +ositive s+i''overs #rom dire$t#orei(n investment^7 Eviden$e #rom +ane' data #or Aoro$$o0 @meri$an

E$onomi$ Revie" $2 &3444), 53-LO0

J2M 2en4David5 D! and 6!! 7oewy5 ree trade and 'on(-run (ro"th0mimemo, 1niversit*o# ouston&3445)0

JM 2lomstrom5 6! and F! 89oholm5 !e$hno'o(* trans#er and s+i''overs7Does 'o$a' +arti$i+ation "ith mu'tinationa's matter^ Eu- ro+ean E$onomi$Revie" $3 &3444), 435-420

JOM 2orens:tein5 0!5 ;! De


29/30

J33M ! 8u:ui, R%D $a+ita', rate o# return on R%D investment ands+i''overs o# R%D in ;a+anese manu#a$turin( industries0 Revie" o# E$onomi$s and

254-2O0

J36M 3all5 ! and ;! 6airesse, E/+'orin( the re'ationshi+ bet"een R%D and+rodu$tivit* in ren$h manu#a$turin( rms0 ;ourna' o# E$onomet- ri$s % &3445),2-240

J34M >amien5 6! and I! @ang, Aeet me ha'#"a*7 resear$h 8oint ventures andabsor+tive $a+a$it*0 Internationa' ;ourna' o# Industria' Br(ania- tion 1* &2),445-3320

J2M >eller5 =!, @re internationa' R%D s+i''overs trade-re'ated^ @na- '*in(s+i''overs amon( random'* mat$hed trade +artners0 Euro+ean E$onomi$ Revie"

&344L), 3O4-630

J23M >inoshita5 !5 !e$hno'o(*


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J22M >oo5 A!, orei(n Dire$t Investment, ost Countr* Chara$teristi$s, and

onings5 ;!, !he effe$ts o# #orei(n dire$t investment on domesti$ rms7Eviden$e #rom rm 'eve' +ane' data in emer(in( e$onomies0 CEPR Dis$ussion

Pa+er No0 256 &2)0

J25M 6ans)ield5 0! and 6! Romeo, !e$hno'o(* trans#er to overseas subsidiariesb* 100 Gri'i$hes), 1niversit* o# Chi$a(o Press&346O)0

J24M =ang5 ;! and 6! 2lomstrom, orei(n investment and te$hno'o(* trans#er7 @sim+'e mode'0 Euro+ean E$onomi$ Revie" 3 &3442), 3L-

3550

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R&D Theory