OVERSEAS R&D ACTIVITIES AND HOME PRODUCTIVITY GROWTH: EVIDENCE FROM JAPANESE FIRM-LEVEL DATA

This paper investigates the impact of overseas subsidiaries' R&D activities on the productivity growth of parent firms Using firm-level data for Japanese multinational enterprises. Based oil Survey responses, we classify each overseas subsidiary's R&D as either 'innovative R&D,' which we hypothesize is likely to lead to the acquisition of foreign knowledge, or 'adaptive R&D,' which is more likely to lead to adaptation to local conditions. We find that overseas innovative R&D raises the parent firm's productivity growth, while adaptive R&D has no such effect. In addition, overseas innovative R&D does not improve the rate of return on home R&D.