Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 1996 erstellt
Description:
Do multinationals cooperate in research and development with local firms in developing countries? This paper explores the theoretical underpinnings and provides new empirical evidence of Ramp;D cooperation between firms with asymmetric endowments of knowledge.Barba Navaretti and Carraro analyze the determinants of interfirm agreements between industrial and developing countries for research and development (Ramp;D) - that is, between firms with asymmetric endowments of knowledge. They develop a model in which a multinational has two options: (1) setting up a subsidiary and competing with a local firm in a duopoly, or (2) implementing an agreement and sharing monopoly profits. The two firms, if they choose the agreement, may also cooperate in Ramp;D. The model shows that:deg; The choice of cooperating in Ramp;D is influenced by the intertemporal preferences of the developing country firm, the relative efficiency in Ramp;D of the two firms, and the extent of knowledge spillovers.deg; The choice of cooperating in Ramp;D increases both the profitability and stability of the agreement, stability because it affects the long-term trust between the partners.The empirical analysis is based on a data set of international arm's length agreements, part of which involve joint Ramp;D. Testing the two-choice model supports some of the key theoretical results and assumptions. Ramp;D agreements are particularly likely to emerge when firms are operating in knowledge-intensive industries (where nontangible assets, like knowledge, are large relative to tangible assets), when the partners have a nonhierarchical contractual relationship (they all contribute to the Ramp;D effort), and when technological asymmetries between home and host countries (as proxies of knowledge endowments of the contracting firms) exist but are not too great.This paper - a product of the International Trade Division, International Economics Department - is part of a larger effort in the department to examine the impact of foreign direct investments on developing countries