Title: International trade and R&D investment: evidence from manufacturing firms in India

Authors: Mavannoor Parameswaran

Addresses: Centre for Development Studies, Prasanth Nagar Road, Ulloor, Trivandrum 695 011, Kerala, India

Abstract: This paper examines the effect of international trade on firms| investment in R&D. As the theoretical literature on this is ambiguous and contingent on many industry-and firm-specific details, an empirical analysis assumes significance. The study shows that export, in general, encourages investment in innovation, while R&D promoting effect of capital goods and disembodied technology import is not widespread. The impact of import competition, the study shows, depends on domestic market structure. It promotes investment in R&D only when domestic market is highly concentrated otherwise it has negative effect. The paper, thus, brings out the conditional nature of impact of trade on investment in R&D. This result supports the recent developments in the growth literature on the relationship between product market competition and innovation.

Keywords: R&D investment; trade liberalisation; economic growth; market structure; innovation; research and development; international trade; manufacturing firms; India.

DOI: 10.1504/IJTG.2010.033665

International Journal of Technology and Globalisation, 2010 Vol.5 No.1/2, pp.43 - 60

Published online: 15 Jun 2010 *

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