In:
The Journal of Technology Transfer, Springer Science and Business Media LLC
Abstract:
The subsidiaries of foreign-owned multinational firms make significant contributions to national Research and Development (R & D) in many host countries. Policymakers in host countries often support subsidiaries’ R & D efforts, through R & D grants and R & D tax credits. A key objective of this funding is to leverage R & D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to commercially exploit the results from host country-funded R & D projects, in the host country. Therefore, supporting subsidiaries’ R & D presents a unique risk, that significant amounts of scarce public R & D funding may translate into little, or no firm performance payoffs for the host economy. To address this issue, we construct a unique panel dataset, containing 24,404 observations of firms in Ireland over a 10-year period. Using this rich data, we first evaluate the impact of R & D grants and R & D tax credits on subsidiaries’ R & D. We then examine the link between policy-induced R & D from each policy instrument, and subsidiaries’ firm performance in the host country. Our study provides the first evaluation of (1) whether public R & D funding stimulates additional R & D investment in subsidiaries, (2) whether policy-induced R & D drives subsidiaries’ firm performance in the host country, and (3) the differential effects of R & D grants and R & D tax credits. We find that both R & D policy instruments drive subsidiary R & D, and that the policy-induced R & D results in substantial host country improvements in turnover, exports, and value added. Our results suggest several policy implications, particularly for economies pursuing an R & D strategy which targets foreign-owned subsidiaries.
Type of Medium:
Online Resource
ISSN:
0892-9912
,
1573-7047
DOI:
10.1007/s10961-023-09995-9
Language:
English
Publisher:
Springer Science and Business Media LLC
Publication Date:
2023
detail.hit.zdb_id:
2017817-7
SSG:
3,2
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