Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314752 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11713
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper provides an integrated analysis of multinational companies' global production and innovation. We establish novel stylized facts using rich data on the network of production affiliates and patent activity of German multinationals. We rationalize these facts with a heterogeneous-firm model, in which companies jointly determine the location and scale of production, basic innovation and applied innovation, under asymmetric complementarities across these three activities. Empirical evidence consistent with the model indicates that bigger MNCs innovate more intensively in terms of patent frequency and quality, and offshore innovation to more countries, including both countries with and without production affiliates. Moreover, MNCs' innovation portfolio follows countries' comparative advantage across technology classes, with applied innovation more likely to be co-located with production than basic innovation.
Subjects: 
multinational firms
FDI
offshoring
innovation
patents
JEL: 
F20
F23
F63
L23
L24
O31
O32
Document Type: 
Working Paper
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