Fulvio, Castellacci (2011): Service innovation and the proximity-concentration trade-off model of trade and FDI.
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This paper introduces service innovation in the proximity-concentration trade-off model of trade and FDI (Helpman, Melitz and Yeaple, 2004). The idea is that innovation will have two main effects on service firms’ choice between exports and FDI. First, innovative firms will on average have higher productivity levels than non-innovative enterprises. Secondly, innovators will have to pay a higher relational distance cost for undertaking export activities, and they will therefore prefer to avoid (or reduce) these costs by choosing a FDI strategy instead. We test the empirical relevance of this idea on a new survey dataset for a representative sample of firms in all business service sectors in Norway. The results show that firms are more likely to choose FDI rather than export the greater their productivity level and the higher the relational distance costs they face.
|Item Type:||MPRA Paper|
|Original Title:||Service innovation and the proximity-concentration trade-off model of trade and FDI|
|Keywords:||Service sectors; innovation; export; FDI; firm heterogeneity; survey data|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F1 - Trade > F10 - General
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences; Diffusion Processes
|Depositing User:||Fulvio Castellacci|
|Date Deposited:||20. May 2011 10:21|
|Last Modified:||12. Feb 2013 16:36|
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