Research and Development Operations and Foreign Expansion of Multinational Companies: Evidence from Forest Industry Microdata

Abstract

This article examines the impacts of research and development on the mode of multinational expansion (exports versus foreign sales) by forest products companies, and the effects of firms' international strategy on the level of research and development investments. A theoretical model of imperfect competition between international companies is derived and company-level data representing Finnish forest industries are used. The results indicate that the firms' own research and development investments helped, at least during the 1980s, their foreign expansion by favoring the firms' exports rather than foreign sales. External research and development investments by other companies were substitutes for a firm's own investment on research and development in the 1980s, but this effect seems to have disappeared toward the 1990s. There have not appeared to be any significant spillover effects from the research and development activities across the firms.