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Globalization and Innovation in Emerging Markets

Svejnar, Jan; Gorodnichenko, Yuriy; Terrell, Katherine

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.

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Also Published In

Title
American Economic Journal: Macroeconomics
DOI
https://doi.org/10.1257/mac.2.2.194

More About This Work

Academic Units
International and Public Affairs
Publisher
American Economic Association
Published Here
January 31, 2014
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