Multinationality, R&D and productivity: Evidence from the top R&D investors worldwide

This paper investigates the effects of multinationality onfirm productivity, and contributes to theliterature in two respects. First, we argue that multinationality affects productivity both directly andindirectly through higher incentives to invest in R&D. Second, we maintain that the multinational depthand breadth have different direct effects on productivity and R&D. Using data from the top R&D investorsin the world, we propose an econometric model with an R&D and a productivity equation that bothdepend on multinationality. Wefind: i) multinational depth has a positive effect on productivity, whilethe effect of multinational breadth is negative; ii) multinationality (along both dimensions) has a positiveeffect on R&D intensity, translating into an indirect positive effect on productivity; iii) the positiveindirect effect is however not large enough to compensate the negative direct effect of multinationalbreadth.