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Abstract
This research sheds light on the role of multinational production on the
type of innovation performed by firms. We construct matched firm-patent
data to measure the scope of innovation, that is the extent to which the
output of R&D can be spread across different product lines. We focus on
two features of multinational production: (i) core knowledge is
geographically more difficult to transfer abroad to foreign production
sites, (ii) learning spillovers can occur from international operations.
The results reveal that the second effect is more likely to dominate
when a firm is active in more product lines. We argue that a more
diversified portfolio of products increases a firm’s span of learning
from international operations, thereby enhancing its ability to engage
in more fundamental research. In contrast, firms with fewer product
lines that geographically separate production from innovation focus on
more specialized types of R&D.