Effects of economic clusters, FDI and R&D on Innovation: Developing Countries in European Monetary Union Example

Durmuş Çağrı Yıldırım, KORHAN ARUN


This study investigates the impact of clusters, FDI, R&D, and GDP per capita on innovation. Using a unique panel dataset obtained from eight developing countries with similar innovation levels that are in and out of economic clusters from 2001-2014. The empirical results show that dynamic (uncountable) effects of clusters are not statistically significant on innovation, but static effects (countable) are. Therefore, clusters are effective for developing countries on trade but not innovation directly that developing country should increase trade for innovation spillover by moderation effect of being in economic unions.


Intellectual Property Payments; Innovation; Economic Clusters; EMU; FDI; R&D

Full Text:



AlAzzawi, S. (2012). Innovation, Productivity And Foreign Direct Investment-Induced R&D Spillovers. The Journal of International Trade & Economic Development, 21(5), 615-653. doi:10.1080/09638199.2010.513056

Apostolov, M. (2016). Foreign Direct Investments Induced Innovation? A Case Study – Macedonia. Comparative Economic Research, 19(1), 5-25. doi:10.1515/cer-2016-0001

Appleyard, D. R., & Field, Jr., A. J. (2014). International economics (8th ed.). New York: McGraw-Hill/Irwin.

Arun, K., & Yıldırım, D. Ç. (2017). Effects of foreign direct investment on intellectual property, patents and R&D. Queen Mary Journal of Intellectual Property, 7(2), 226 – 241. doi:http://dx.doi.org/10.4337/qmjip.2017.02.05

Audretsch, D. B., Lehmann, E. E., Paleari, S., & Vismara, S. (2016). Entrepreneurial finance and technology transfer. The Journal of Technology Transfer, 41(1), 1-9. doi:10.1007/s10961-014-9381-8

Baltagi, B. H. (2005). Econometric Analysis of Panel Data (3rd ed.). Chichester: John Wiley & Sons Ltd.

Barrios, S., Görg, H., & Strobl, E. (2003). Explaining Firms’ Export Behaviour: R&D, Spillovers and the Destination Market. Oxford Bulletin of Economics and Statistics, 65(4), 475-496.

Bende-Nabende, A., Ford, J., & Slater, J. (2001). FDI, Regional Economic Integration and Endogenous Growth: Some Evidence from Southeast Asia. Pacific Economic Review, 6(3), 383-399.

Bere, R. C., Precup, I. B., & Silvestru, C. I. (2015). On Growth Poles from EU Countries in The Framework of Europe 2020. Procedia Economics and Finance, 23, 920 – 925.

Bertinelli , L., & Nicolini, R. (2005). R&D Investments and the Spatial Dimension: Evidence from Firm Level Data. The Review of Regional Studies, 35(2), 206-230.

Blonigen, B. A., & Davies, R. B. (2004). Do Bilateral Tax Treaties Promote Foreign Direct Investment? In E. K. Choi, & J. Harrigan, Handbook of international trade (pp. 526-546). Malden and Oxford: Blackwell handbooks in economics.

Bordo , M. D., & Jonung, L. (2003). The future of EMU: what does the history of monetary unions tell us? In F. H. Capie, & G. E. Wood, Monetary Unions Theory, history, public choice (pp. 42-73). New York: Taylor & Francis e-Library.

Borensztein, E., De Gregorio, J., & Lee, J. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45, 115–135.

Bosch, J., Capel, L., Cougoule, F., Ferrari, G., & Solanas, S. (2012). Towards Urban High-technolgy Clusters: An International Comparison. Urbani izziv, 29-41. doi:10.5379/urbani-izziv-en-2012-23-supplement-1-003

Bourreau, M., Lupi, P., & Manenti, F. M. (2014). Old technology upgrades, innovation, and competition in vertically differentiated markets. Information Economics and Policy, 29, 10-31. doi:10.1016/j.infoecopol.2014.08.001

Brandäo Fisher, B. (2015). FDI Attraction And Innovation Policy: An Absorptıve Capacıty Approach. Revista de Estudios Empresariales. Segunda época., 2, 101 – 117. doi:10.17561/ree.v0i2.2742

Caraman, H., & Simona, O. (2015). Classical, Neoclassical and New Classical Theories and Their Impact on Macroeconomic Modelling. Procedia Economics and Finance, 23, 309 – 312.

Carlberg, M. (1999). European Monetary Union: Theory, Evidence, And Policy. New York, Heidelberg: Physica-Verlag A Springer-Verlag Company .

Choi, E. K., & Harrigan, J. (2004). Handbook of international trade. Oxford, Malden: Blackwell Publishing Ltd.

Cioran, Z. (2014). EFFECTIVENESS AND LIMITATIONS OF MONETARY POLICY INSTRUMENTS IN ROMANIA AND THE EUROPEAN UNION. CES Working Papers, 6(4), 43-56. Retrieved from http://ceswp.uaic.ro/articles/CESWP2014_VI4_CIO.pdf

de Mello Jr., L. R. (1997). Foreign direct investment in developing countries and growth: A selective survey. Journal of Development Studies, 34(1), 1-34. Retrieved from http://dx.doi.org/10.1080/00220389708422501

Dyker, D. A. (1999). Foreign direct investment in the former communist world: A key vehicle for technological upgrading? Innovation: The European Journal of Social Science Research, 12(3), 345-352. doi:http://dx.doi.org/10.1080/13511610.1999.9968608

Ebner, A. (2013). Cluster policies and entrepreneurial states in East Asia. In S. Eriksson, Clusters and Economic Growth in Asia (pp. 1-21). Cheltenham: Edward Elgar Publishing Limited.

Fabre, R., Messerschmidt-Mariet, Q., & Holvoet, M. (2016). New Challenges for Knowledge Digital Dynamics to Access and Sharing. London, Hoboken: ISTE Ltd and John Wiley & Sons, Inc. doi:978-1-78630-090-4

Fagerberg, J., & Verspagen , B. (1996). Heading for Divergence? Regional Growth in Europe Reconsidered. Journal of Common Market Studies, 34(3), 431-448.

Falk, M. (2004). What Determines Patents per Capita in OECD Countries? WIFO Working Papers, No. 242 (ÖSTERREICHISCHES INSTITUT FÜR WIRTSCHAFTSFORSCHUNG).

Fink, C., & Braga, C. A. (2005). How Stronger Protection of Intellectual Property Rights Affects International Trade Flows. In C. Fink, & K. E. Maskus, Intellectual Property And Development Lessons from Recent Economic Research Trade and development series (pp. 19-40). Washington, DC: A copublication of the World Bank and Oxford University Press.

Gertler, M. S., & Levitte, Y. M. (2005). Local Nodes in Global Networks: The Geography of Knowledge Flows in Biotechnology Innovation. Industry and Innovation, 12(4), 487-507. doi:http://dx.doi.org/10.1080/13662710500361981

Giuliani, E. (2013). Network dynamics in regional clusters: Evidence from Chile. Research Policy, 42, 1406–1419. Retrieved from http://dx.doi.org/10.1016/j.respol.2013.04.002

Gomez-Herrera, E., Martens, B., & Turlea, G. (2014). The drivers and impediments for cross-border e-commerce in the EU. Information Economics and Policy, 28, 83-96. doi:10.1016/j.infoecopol.2014.05.002

Gurova, I. (2014). A Theoretical Model for Trade Integration in the CIS Region. Problems of Economic Transition, 57(5), 37-57. doi:http://dx.doi.org/10.2753/PET1061-1991570502

Hancké, B. (2013). Labour Market Institutions and Monetary Integration In Europe. Oxford: Oxford University Press.

Herzer, D. (2012). How Does Foreign Direct Investment Really Affect Developing Countries’ Growth? Review of International Economics, 20(2), 396–414. doi:10.1111/j.1467-9396.2012.01029.x

Hindman, D. (2006). THE EFFECT OF INTELLECTUAL PROPERTY REGIMES ON FOREIGN INVESTMENTS IN DEVELOPING ECONOMIES. Arizona Journal of International & Comparative Law, 23(2), 467-492.

Judge, E. F., & Gervais, D. J. (2015). The limits of patents. In D. J. Gervais, International Intellectual Property A Handbook of Contemporary Research (pp. 246-271). Edward Elgar Publishing Limited: Cheltenham. doi:10.4337/9781782544807

Kelly, C., & Sheppard, B. (2017). Common Purpose: Realigning Business, Economies, and Society. Strategy+Business, 56-77.

Kesidou, E., & Snijders, C. (2012). External Knowledge and Innovation Performance in Clusters: Empirical Evidence from the Uruguay Software Cluster. Industry and Innovation, 19(5), 437-457. doi:http://dx.doi.org/10.1080/13662716.2012.711028

Kim, D.-H., Lin, S.-C., & Suen, Y.-B. (2012). Dynamic Effects of Financial Openness on Economic Growth and Macroeconomic Uncertainty. Emerging Markets Finance and Trade, 48(1), 25-54. Retrieved from http://dx.doi.org/10.2753/REE1540-496X480102

Krishna, P. (1998). Regionalism and Multilateralism: A Political Economy Approach. The Quarterly Journal of Economics, 113(1), 227-251. Retrieved from http://www.jstor.org/stable/2586990

Krishna, P. (1998). Regionalism and Multilateralism: A Political Economy Approach. The Quarterly Journal of Economics, 113(1), 227-251. Retrieved from http://www.jstor.org/stable/2586990

Kuo, K.-H., & Lee, C.-T. (2016). Economic Integration, Growth and Income Distribution. Australian Economic Papers, 56(1), 58-71. doi:10.1111/1467-8454.12076

Lai, E. L.-C. (1998). International Intellectual Property Rights Protection and the Rate of Product Innovation. Journal of Development Economics,, 55, 133-153. Retrieved 03 23, 2017, from http://ihome.ust.hk/~elai/pdf/JDE.PDF

Lee, J. (2012). Network effects on international trade. Economics Letters, 116, 199-201. doi:10.1016/j.econlet.2012.02.017

Levin, A., Lin, C.-F., & Chu, C.-S. J. (2002). Unit Root Tests in Panel Data: Asymptotic and. Journal of Econometrics, 1-24.

Liu, T.-K., Chen, J.-R., Huang, C. C., & Yang, C.-H. (2013). E-commerce, R&D, and productivity: Firm-level evidence from Taiwan. Information Economics and Policy, 25(4), 272-283. doi:10.1016/j.infoecopol.2013.07.001

Long , C. X., & Wang, J. (2016). Evaluating Patent Promotion Policies in China: Consequences for Patent Quantity and Quality. In D. Prud’homme, & H. Song, Economic Impacts of Intellectual Property-Conditioned Government Incentives (pp. 235-258). Singapore: Springer Nature. doi:10.1007/978-981-10-1119-1

Maddala, G. S., & Wu, S. (1999). A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test. Oxford Bulletin of Economics and Statistics, 61, 631–652. doi:10.1111/1468-0084.0610s1631

Maskus, K. E. (16-19 July 1997). The Role of Intellectual Property Rights in Encouraging Foreign Direct Investment and Technology Transfer. (pp. 1-43). Brussels, Belguim: Public-Private Initiatives After TRIPS: Designing a Global Agenda. Retrieved from http://siteresources.worldbank.org/INTRANETTRADE/Resources/maskus2.pdf

McCloud, N., & Kumbhakar, S. C. (2012). Institutions, foreign direct investment and growth: a hierarchical Bayesian approach. Journal of the Royal Statistital Society, 175(1), 83–105.

Milea, C. (2015). Connections Between Foreign Direct Investments and Research-Development- Innovation Activity. Financial Studies, 102-120.

Minian, I. (2007). Knowledge, obsolescence, and product segmentation. In A. J. Scott, & G. Garofoli, Development on the Ground Clusters, networks and regions in emerging economies (pp. 302-321). New York: Routledge.

Misra, B. S. (2010). Credit Cooperatives in India: Past, Present and Future. New York: Routledge.

Möhring, J. (2005). Clusters: Definition and Methodology. In J. Möhring, Business Clusters Promoting Enterprise in Central and Eastern Europe (pp. 19-20). OECD.

Najarzadeh, R., Rahimzadeh, F., & Reed, M. (2014). Does the Internet increase labor productivity? Evidence from a cross-country dynamic panel. Journal of Policy Modeling, 36, 986–993. Retrieved from http://dx.doi.org/10.1016/j.jpolmod.2014.10.003

Olwan, R. M. (2013). Intellectual Property and Development Theory and Practice. Berlin: Springer. doi:10.1007/978-3-642-27907-2

Paraušić, V., Cvijanović, D., Mihailović, B., & Veljković, K. (2014). Correlation between the state of cluster development and national competitiveness in the Global Competitiveness Report of the World Economic Forum 2012–2013. Economic Research-Ekonomska Istraživanja, 27(1), 662-672. doi:10.1080/1331677X.2014.974917

Pater , R., & Lewandowska, A. (2015). Human capital and innovativeness of the European Union regions. Innovation: The European Journal of Social Science Research, 28(1), 31-51. doi:http://dx.doi.org/10.1080/13511610.2014.962487

Pater, R., & Lewandowska, A. (2015). Human capital and innovativeness of the European Union regions. Innovation: The European Journal of Social Science Research, 28(1), 31-51. doi:10.1080/13511610.2014.962487

Pedroni , P. (1999, December). Fully Modified OLS for Heterogeneous Cointegrated Panels. Working Paper, 1-40. Indiana University.

Pedroni, P. (2000). Fully Modified Ols for Heterogeneous Cointegrated Panels. Nonstationary Panels, Panel Cointegration and Dynamic Panels working paper, 15, 93-130. Retrieved 03 22, 2017, from https://web.williams.edu/Economics/wp/pedroniaie.pdf

Pedroni, P. (2001). Purchasing Power Parity Tests in Cointegrated Panels. Review of Economics and statistics, 83(4), 727-731.

Phusavat, K., Comepa, N., Sitko-Lutek, A., & Ooi, K.-B. (2012). Intellectual capital: national implications for industrial competitiveness. Industrial Management & Data Systems, 112(6), 866 - 890. Retrieved from http://dx.doi.org/10.1108/02635571211238491

Pisani-Ferry, J. (2013). The known unknowns and unknown unknowns of European Monetary Union. Journal of International Money and Finance, 34, 6-14. Retrieved from http://dx.doi.org/10.1016/j.jimonfin.2012.11.002

Polanyi, K. (2001). The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press.

Preissl , B., & Solimene, L. (2003). The Dynamics of Clusters and Innovation Beyond Systems and Networks. Berlin: Springer-Verlag Berlin Heidelberg GmbH. doi:10.1007/978-3-642-50011-4

Rivera-Batiz, L. A., & Romer, P. M. (1991). Economic Integration and Endogenous Growth. The Quarterly Journal of Economics, 106(2), 531-555. Retrieved from http://www.jstor.org/stable/2937946

Rose , R., & Borz, G. (2016). Static and Dynamic Views of European Integration. journal of Common Market Studies, 54(2), 370-387. doi:10.1111/jcms.12295

Russu , C. (2016). Foreign Direct Investment in the European Union. Economic Insights – Trends and Challenges, V(LXVIII) (1), 51 - 63.

Ryder, R. D., & Madhavan, A. (2014). Intellectual property and business: the power of intangible assets. London: SAGE.

Sadeh , T., & Verdun, A. (2009). Explaining Europe’s Monetary Union: A Survey of the Literature. International Studies Review, 11, 277–301.

Salmon , M. (2003). Comments. In G. E. Wood, Monetary Unions Theory, history, public choice (pp. 189-193). New York and London: Routledge.

Sargent , J., & Matthews, L. (2008). Capital Intensity, Technology Intensity, and Skill Development in Post China/WTO Maquiladoras. World Development, 36(4), 541-559. doi:10.1016/j.worlddev.2007.04.015

Schäfer, B. (2016). Monetary union with sticky prices and direct spillover channels. Journal of Macroeconomics, 49, 99–118. Retrieved from http://dx.doi.org/10.1016/j.jmacro.2016.06.003

Schneider, P. H. (2005). International trade, economic growth and intellectual property rights: A panel data study of developed and developing countries. Journal of Development Economics, 78, 529– 547. doi:10.1016/j.jdeveco.2004.09.001

Schneider, P. H. (2005). International trade, economic growth and intellectual property rights: A panel data study of developed and developing countries. Journal of Development Economics, 78, 529– 547. doi:10.1016/j.jdeveco.2004.09.001

Scott, G. R. (2015). A protocol to evaluate the impact of intellectual property on innovation outcomes. In D. J. Gervais, International Intellectual Property A Handbook of Contemporary Research (pp. 272-311). Cheltenham: Edward Elgar Publishing Limited.

Shang, Q., Poon, J. P., & Yue, Q. (2012). The role of regional knowledge spillovers on China's innovation. China Economic Review, 23, 1164–1175. Retrieved from http://dx.doi.org/10.1016/j.chieco.2012.08.004

Sölvell, Ö., Lindqvist, G., & Ketels, C. (2003). The Cluster Initiative Greenbook. Cluster-research.org. Retrieved 12 23, 2016, from https://www.hhs.se/contentassets/f51b706e1d644e9fa6c4d232abd09e63/greenbooksep03.pdf

Sonmez, A. (2013). Multinational Companies, Knowledge and Technology Transfer Turkey’s Automotive Industry in Focus. New York, Dordrecht, London: Springer. doi:10.1007/978-3-319-02033-4

Tavlas, G. S. (2009). THE BENEFITS AND COSTS OF MONETARY UNION IN SOUTHERN AFRICA: A CRITICAL SURVEY OF THE LITERATURE. Journal of Economic Surveys, 23(1), 1–43. doi:10.1111/j.1467-6419.2008.00555.x

Ulusoy , V., & Yalcin , E. (2011). Convergence Of Productivity Levels Among The EU Countries: Evidence From A Panel of Industries. Australian Economic Papers, 50(2-3), 98-114. doi:10.1111/j.1467-8454.2011.00414.x

Visser, E.-J. (2009). The Complementary Dynamic Effects of Clusters and Networks. Industry and Innovation, 16(2), 167-195. doi:http://dx.doi.org/10.1080/13662710902764287

von Zedtwitz , M. (Jan 2005, January 24-25). International R&D Strategies in Companies from Developing Countries – the Case of China. Paper presented at the UNCTAD Expert Meeting on the Impact of FDI on Development. Geneva. Retrieved 03 24, 2017, from http://www.proglocode.unam.mx/sites/proglocode.unam.mx/files/Max%20von...R%26D%20strategies,%20China_0.pdf

Walz, U. (1997). Innovation, Foreign Direct Investment and Growth. Economica, New Series, 64(253), 63-79. Retrieved from http://www.jstor.org/stable/2554922

Walz, U. (1998). Does an enlargement of a common market stimulate growth and convergence? Journal of International Economics, 45, 297–321.

Wasserfallen, F. (2014). Political and Economic Integration in the EU: The Case of Failed Tax Harmonization. Journal of Common Market Studies, 52(2), 420–435. doi:10.1111/jcms.12099

Wetter , J. J. (2011). The Impacts of Research and Development Expenditures The Relationship Between Total Factor Productivity and U.S. Gross Domestic Product Performance. New York: Springer. doi:10.1007/978-1-4419-7530-0

Wheeler , D., & Mody, A. (1992). International Investment Location Decisions The case of U.S. firms. Journal of International Economics, 33, 57-76.

Wignaraja, G. (2008). Foreign Direct Investment, Innovation, and Exports: Firm-Level Evidence from People’s Republic of China, Thailand, and Philippines (Vol. 134). Manila, Philippines: ADB Economics Working Paper Series. Retrieved from www.adb.org/economics

World Bank . (2017, January 09). Retrieved from http://databank.worldbank.org/data/reports: http://databank.worldbank.org/data/reports.aspx?source=2&series=BM.GSR.ROYL.CD&country=

Xuan , X. (2013). Fusion of Horizons: A New Perspective on Intellectual Property Rights. Social Sciences in China, 34(1), 137-150. doi:10.1080/02529203.2013.760722

Ye, F. Y. (2007). A quantitative relationship between per capita GDP and scientometric criteria. Scientometrics, 71(3), 407–413. doi:10.1007/s11192-007-1678-z

Ye, F. Y. (2007). A quantitative relationship between per capita GDP and scientometric criteria. Scientometrics, 71(3), 407–413. Retrieved from https://doi.org/10.1007/s11192-007-1678-z

Zhou, Y. (2008). Synchronizing Export Orientation with Import Substitution: Creating Competitive Indigenous High-Tech Companies in China. World Development, 36(11), 2353–2370. doi:10.1016/j.worlddev.2007.11.013


  • There are currently no refbacks.

Int. J. Innov. e-ISSN: 2318-9975

Rua Vergueiro, 235/249 - Liberdade, São Paulo - SP (Brasil), Cep: 01504-000

Licença Creative Commons
Este obra está licenciado com uma Licença 
Creative Commons Atribuição-NãoComercial-CompartilhaIgual 4.0 Internacional