Subsidizing Away Exports? A Note on R&D-Policy Towards Multinational Firms
Journal of Industry, Competition and Trade, Vol. 11(1): 25‒42, 2011
30 Pages Posted: 2 Feb 2011 Last revised: 2 Jul 2020
Date Written: May 18, 2010
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: Suggested Citation