Publication Type

Journal Article

Version

submittedVersion

Publication Date

10-2023

Abstract

Utilizing industry-level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we evaluate how cross-border technology investments respond to economic recessions. We find that FDI embedded with intensive research and development (R&D) drops when the destination market is in a recession and the source market is in a normal state and recovers to the pre-recession levels when both destination and source markets are in recession. However, there is little evidence that recessions affect cross-border investments in other aspects of technology measured by the penetration of robots, intellectual property products and information and communications technology (ICT). The response of R&D-intensive FDI to recessions is particularly pronounced in deep and long recessions, during the propagation stage of recessions and in destination markets with relatively weak institutional protection of intellectual property and rule of law, loose FDI regulation and high financial development. Our findings are limited to advanced markets: there is no evidence that R&D-intensive FDI from or to emerging markets responds to either destination or source market recessions.

Keywords

Research and development, business cycle, growth, FDI, globalization, contractions, cyclicality, destruction, volatility, patterns

Discipline

Finance | International Economics

Research Areas

International Economics

Publication

Canadian Journal of Economics / Revue Canadienne d'Économique

ISSN

0008-4085

Identifier

10.1111/caje.12686

Publisher

Wiley: 24 months

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/caje.12686

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