Social and Behavioral Sciences Commons^™

The Gravity Of R&D Fdis, Antonello Zanfei, Davide Castellani, Alfredo Jimenez Palmero

Antonello Zanfei

The gravity model predicts that international trade and FDI should fade with geographic distance. The negative effect of distance is justified by the existence of transport costs which hamper the international exchange of final and intermediate goods, and by higher uncertainty about local markets. We submit that distance plays a remarkably different role in the case of R&D FDIs since they mainly involve the international transfer, absorption and use of knowledge. Using data on bilateral investment projects in R&D, manufacturing and other business activities between 58 countries, we find that geographic distance does not hinder R&D FDIs as much as …