Subsidizing Away Exports? A Note on R&D-Policy Towards Multinational Firms

IFN Working Paper No. 832

Journal of Industry, Competition and Trade, Vol. 11(1): 25‒42, 2011

30 Pages Posted: 2 Feb 2011 Last revised: 2 Jul 2020

See all articles by Pehr-Johan Norbäck

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Date Written: May 18, 2010

Abstract

In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive firms to locate production abroad. Investigating firm-level data on Swedish MNEs, however, I find no evidence of such relocation. R&D subsidies rather tend to en courage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods.

Keywords: Multinational Firms, R&D, Subsidies, Location, Empirical Analyses

JEL Classification: L13, F23, O33

Suggested Citation

Norbäck, Pehr-Johan, Subsidizing Away Exports? A Note on R&D-Policy Towards Multinational Firms (May 18, 2010). IFN Working Paper No. 832, Journal of Industry, Competition and Trade, Vol. 11(1): 25‒42, 2011, Available at SSRN: https://ssrn.com/abstract=1752950 or http://dx.doi.org/10.2139/ssrn.1752950

Pehr-Johan Norbäck (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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