Technology spillover and productivity growth under R&D consortia policy

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Southern New Hampshire University
This present research studies the effect of the R&D consortia policy on the productivity growth and technology spillover through FDI in the Southeast Asia region using a system dynamics approach Thailand, Malaysia, and Vietnam are selected as the representative countries in the Southeast Asia region. The R&D consortia policy has not been implemented in these three countries. However, the effect of the R&D consortia policy on the selected countries is examined through the Japanese case which successfully utilizes the R&D consortia policy. The study shows that Thailand, Malaysia, and Vietnam gain benefits from the R&D consortia policy by having higher productivity. Increase in the country's productivity also improves the average income of the population in that country. By having more income per person, the country can attract more FDI which in turn increases the technology spillover and productivity of the country. Through sensitivity analysis, the country can gain more benefits by shortening the policy implementation duration. However, these benefits are the short-term benefits instead of the long-term benefits. The negative reaction of foreign firms toward the implementation of the R&D consortia policy also shows insignificant effect on the productivity of the country and the GDP per capita although it lowers the level of FDI. The effect of the R&D consortia policy on the improvement of the productivity growth, country's economy, and foreign investment varies due to the economic situation and the risk of the country. The country with mature economy gains more productivity growth but acquires less additional FDI from the policy while the country with a rapidly growing economy receives less benefit in terms of country productivity but acquires more benefits in terms of FDI. The country which is perceived by foreign investors as a high risk country requires a longer period until the effect of the R&D consortia policy on the increase in FDI takes place. (Author abstract)