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Innovation Fact of the Week: Every Dollar a U.S. Multinational Company Invests in Domestic R&D Creates $1.80 in Economic Benefits for its Foreign Affiliates

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When U.S. multinational companies invest in domestic R&D, they create myriad economic returns for their foreign affiliates. These benefits include improved productivity, increased trade with the U.S. headquarters, and induced foreign R&D investment. Economists L. Kamran Bilir and Eduardo Morales estimate that every dollar a U.S. multinational invests in domestic R&D generates an average of $1.80 in knock-on benefits for its overseas affiliates.

This supports economic growth in both developing and developed countries. Kamran and Morales further estimate that for the computer industry alone, if U.S. multinationals’ foreign affiliates could no longer benefit from domestic R&D investment in the United States, then economic output would fall by 2.26 percent in Mexico, 2.40 percent in Indonesia, 8.11 percent in Canada, and 10.54 percent in Finland.

Read last week’s Innovation Fact of the Week

Photo Credit: Raaziq International via Flickr

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About the author

John Wu is an economic research assistant at ITIF His research interests include green technologies, labor economics, and time use. He graduated from the College of Wooster with a bachelor of arts in economics and sociology, with a minor in environmental studies.