Moving up or moving out? A unified theory of R&D, FDI, and trade
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Detail(s)
Original language | English |
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Pages (from-to) | 324-343 |
Journal / Publication | Journal of International Economics |
Volume | 71 |
Issue number | 2 |
Online published | 4 Oct 2006 |
Publication status | Published - Apr 2007 |
Externally published | Yes |
Link(s)
Abstract
This paper introduces industrial heterogeneity in R&D productivity into the quality-ladder model of the North-South trade to study how firms' choices made between R&D and foreign direct investment (FDI) vary across industries, and how such choices consequently determine the evolution of comparative advantage and trade. It shows that trade reveals product-cycle dynamics in medium-tech industries but remains static in others. High-tech industries experience continued innovation in the North with no migration of product lines. Medium- and low-tech industries migrate South via FDI to exploit low production costs with the South then replacing the North as the dominant exporter. However, medium-tech industry production eventually shifts back to the North when superior products are marketed by Northern innovators, making the end of one complete product cycle and the start of the next. Because of marginal R&D productivity, the relocated low-tech industries are not presented with the option of moving up and thus stagnate.
Research Area(s)
- Foreign direct investment, Vertical innovation, Product-cycle trade
Citation Format(s)
Moving up or moving out? A unified theory of R&D, FDI, and trade. / Lu, Chia-Hui.
In: Journal of International Economics, Vol. 71, No. 2, 04.2007, p. 324-343.
In: Journal of International Economics, Vol. 71, No. 2, 04.2007, p. 324-343.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review