Multinational Production, Absorptive Capacity, and Endogenous R&D Spillovers

Abstract

Do R&D spillovers have an impact on whether firms choose to go multinational or not? We present a three-stage Cournot duopoly model, which identifies under what conditions firms choose to service a foreign market through exports or localized production. The establishment of a foreign subsidiary improves the ability to learn from foreign R&D since spillovers are strongly moderated by geographical distance. We explicitly model the concept of absorptive capacity, where gains from spillovers are determined by own R&D investments. With exogenous R&D investments, the absorptive capacity effect contributes to increase the gains from going multinational when the firm is R&D-intensive. However, if R&D investments are endogenous, only medium-sized absorptive capacity effects will result in firms going multinational. Furthermore, higher spillover rates do not necessarily drive down R&D and profits for the multinational firm. This stands in contrast to models that ignore absorptive capacity effects. Copyright � 2006 The Authors; Journal compilation � 2006 Blackwell Publishing Ltd.

Complex Dynamics and Chaos Control on a Kind of Bertrand Duopoly Game Model considering R&D Activities

“…We utilize this method to control the chaos of system (9). The external control signal is as follows:…”

“…The strange attractor indicates inherent regularity of the chaos, which is an important characteristic of chaos. Figure 5 shows three classic chaos attractors for system (9). Figure 6(a) shows the phase diagram of system (9) for ( 1 = 1.39, 2 = 0.36) when system (9) in a chaotic state.…”

“…When 2 > 0.9624, system (9) loses stability and undergoes period doubling bifurcations to chaos. Figure 8 shows three typical chaos attractors of system (9).…”

“…Luckraz [8] demonstrated innovation (or Schumpeter's) cycles in a discrete and finite dynamic game of innovation and imitation and concluded that strategic interactions were sufficient to generate cycles. Grunfeld [9] presented a three-stage Cournot duopoly model, 2 Discrete Dynamics in Nature and Society which under conditions identified by firms was chosen to service a foreign market through exports or localized production.…”

FDI spillovers and Intellectual Property Rights

“…Whether the level of spillovers is exogenous or endogenous is another issue to be addressed. Grünfeld (2006) develops a three-period duopoly model. It is assumed that a firm's marginal cost depends on R&D investments by itself and the rival firm in case of FDI, and that FDI spillovers gets larger as its own R&D investment gets larger.…”