Location of R&D and High-Tech Production by Vertically Integrated Multinationals

Reprint No. 2007:18

Author(s): Karolina Ekholm and Katariina HakkalaYear: 2007 Title: Economic Journal Volume (No.): 117 (518) Pages: 512–543

This article extends the theory of multinational firms by allowing for agglomeration forces in firmlevel activities such as R&D as well as in production. We develop a two-country general-equilibrium model where firms make separate choices about the location of R&D and production. There are R&D spillovers and a home-market effect creating incentives for firms to locate production in the relatively large market. For relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialise in R&D. While skilled labour may gain from hosting an agglomeration of R&D activities, unskilled labour

Ekholm, Karolina and Katariina Hakkala (2007), "Location of R&D and High-Tech Production by Vertically Integrated Multinationals". Economic Journal 117(518), 512–543.

Interdisciplinary European Studies

The European Union in a Changing World Order


This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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