Regional economic integration and R&D investment |
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| Authors: | Alvaro Cuervo-Cazurra C Annique Un |
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| Institution: | a Sonoco International Business Department, Moore School of Business, University of South Carolina, 1705 College Street, Room 557, Columbia, SC 29208, USA
b Sonoco International Business Department, Moore School of Business, University of South Carolina, 1705 College Street, Room 555, Columbia, SC 29208, USA |
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| Abstract: | We analyze the influence of a regional economic integration agreement (REIA) on a firm's investments in research and development (R&D). A country's entry into a REIA creates two competing influences on the firm's R&D investments. On the one hand, increased competition in product markets after the REIA would induce the firm to invest in internal R&D to improve its distinctive technological competitiveness. On the other hand, better access to sources of inputs in factor markets after the REIA would induce the firm to purchase external R&D because it can outsource technology more easily. Surprisingly, the empirical analysis shows that the REIA's impact on R&D investment is driven primarily by product markets rather than by factor markets. After the REIA, product markets induce firms not only to invest more in internal R&D but also purchase more external R&D. In contrast, after the REIA factor markets have limited influence on internal or external R&D investments. |
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| Keywords: | L2 O3 |
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