The effects of foreign entry on local innovation
In this study, we provide empirical evidence about the effect of the inflows of innovative foreign direct investments (FDIs) on the patenting performance of European regions. The analysis distinguishes by type of FDI, namely greenfield and brownfield FDIs, covers a balanced panel of NUTS3 European regions for the 2003–2016 period and takes into consideration the endogeneity of FDI flows by means of an instrumental variables approach. The results indicate a negative effect of inward innovative greenfield FDIs on local patenting, while the effect of inward innovative brownfield FDIs is negligible. When examining the specific economic mechanisms behind our main results, the effect of greenfield FDIs is markedly more negative for regions with lower gross domestic product per capita and lower endowments of human capital. Furthermore, incumbent inventors suffer less than new emerging inventors in terms of patent productivity. Overall, our results are consistent with the view that innovative greenfield FDIs contributes to the disruption of local networks of inventors and increases the cost of conducting research and development by incumbent local companies. These negative effects are only partly compensated for by the local availability of adequate skills and absorptive capacity.
DAMIOLI Giacomo;
MARIN Giovanni;
2020-12-16
Publications Office of the European Union
JRC122433
978-92-76-27019-5 (online),
1831-9424 (online),
EUR 30490 EN,
OP KJ-NA-30490-EN-N (online),
https://publications.jrc.ec.europa.eu/repository/handle/JRC122433,
10.2760/449310 (online),
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