Intra-firm technology transfer and r&d in foreign affiliates : substitutes or complements? Evidence from Japanese multinational firms

Intra-firm Technology Transfer and R&D in Foreign Affiliates: Substitutes or Complements? Evidence from Japanese Multinational Firms Rene Belderbos, Banri Ito and Ryuhei Wakasugi G-SEC Working Paper No.10 Issued in November, 2006 ---- Abstract ---- R&D in foreign affiliates and technology transferred from their parent firms are important potential drivers of productivity in host countries. In this paper we examine the simultaneous impact of local R&D and intra-firm international technology transfer on productivity growth in foreign affiliates. We estimate a dynamic productivity model on a large sample of Japanese manufacturing affiliates worldwide in 1996-1997 and 1999-2000. We find that both affiliate R&D and intra-firm technology transfer contribute to productivity growth, while technology transfer exhibits decreasing marginal returns. The two sources of technology are complements: use of one source of technology increases the marginal impact of the other. Keywords: R&D, technology transfer, multinational firms JEL codes: F23, O32, O33