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
UNU-MERIT Working Papers ISSN 1871-9872