Globalization and Innovation in Emerging Markets

Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data from 27 emerging market economies, we estimate the effects of foreign competition and linkages with foreign firms on innovation by domestic firms. We...

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Bibliographic Details
Published in:American economic journal. Macroeconomics 2010-04, Vol.2 (2), p.194-226
Main Authors: Gorodnichenko, Yuriy, Svejnar, Jan, Terrell, Katherine
Format: Article
Language:English
Subjects:
Business innovation
Competition
Economic competition
Emerging markets
Emerging technology
Foreign investment
Globalization
Imports
Innovations
International trade
Macroeconomics
Manycountries
Market competition
Market economies
Multinational corporations
Product innovation
Productivity
Public policy
Studies
Supply chains
Technological innovation
Trade liberalization
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Summary:Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data from 27 emerging market economies, we estimate the effects of foreign competition and linkages with foreign firms on innovation by domestic firms. We provide robust evidence of a positive relationship between foreign competition and innovation, broadly defined. The supply chain of multinational enterprises and trade are also important channels. There is no evidence for an inverted U relationship between innovation and foreign competition. Moreover, the relationship between globalization and innovation does not differ across the manufacturing and service sectors.
ISSN:1945-7707
1945-7715
DOI:10.1257/mac.2.2.194