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Explaining the Current Innovative R&D Outsourcing to Developing Countries

  • Zachary CohleEmail author
Article
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Abstract

While multinational firms from developed countries have used researchers from emerging areas to assist in the adaption of an existing product, few multinational firms have carried out innovative R&D, or R&D for the creation of a new product, in these areas. Using the threat of imitation and wage differences of researchers across regions, this study proposes a partial equilibrium model to explain the lack of innovative R&D in developing countries. I build a North-South model examining a single firm’s choice of research locations. The model predicts that weak IPR-protection in developing countries does not necessarily explain the lack of Southern research. In some situations, reduced IPR-protection can even increase Southern research. Harsh competition resulting from information leaks coupled with weak IPR-protection can explain much of the lack of innovative research investment in the developing world. My model also predicts that firms with low research needs, or firms in low-tech industries, locate their R&D in the North. Firms with medium research need locate in both countries while the firms with the largest research needs, or firms in high-tech industries, locate research in just the South.

Keywords

R&D Innovation IPR-protection Multinational Employee mobility 

JEL Classification

F2 J3 L1 L2 O3 

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsQuinnipiac UniversityHamdenUSA

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