In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive ﬁrms to locate production abroad. Investigating ﬁrm-level data on Swedish MNEs, however, I ﬁnd no evidence of such relocation. R&D subsidies rather tend to encourage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods.
Journal of Industry, Competition and Trade
Subsidizing Away Exports? A Note on R&D–policy Towards Multinational Firms
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