NATIONAL BUREAU OF ECONOMIC RESEARCH
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Innovation in the Global Firm

L. Kamran Bilir, Eduardo Morales

NBER Working Paper No. 22160
Issued in April 2016, Revised in August 2018
NBER Program(s):International Trade and Investment, Productivity, Innovation, and Entrepreneurship

How global are the gains from innovation? When firms operate production plants in multiple countries, technological improvements developed in one location may be shared with foreign sites for efficiency gain. We develop a model that accounts for such transfer, and apply it to measure private returns to R&D investment for a panel of U.S. multinationals during 1989-2008. Our estimates indicate that innovation increases performance at firm locations beyond the innovating site: the median U.S. multinational firm realizes abroad 20 percent of the return to its U.S. R&D investment, suggesting estimates based only on domestic operations understate multinationals' gain from innovation, and revealing a spatial disconnect between the costs and potential gains of policies that encourage multinationals' U.S. innovation.

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Document Object Identifier (DOI): 10.3386/w22160

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