R&D investment and import competition in unionized industries

Abstract

This paper investigates the effect of unionization on the flow of research and development (R&D) investment and import competition in US manufacturing industries. If the unions adopt a myopic strategy, they may attempt to maximize current rents, even if it reduces strategic R&D necessary to compete against imports. However, if unions are employment oriented and realize that R&D is essential to compete effectively against imports and reduce job losses for their members, they may favour a more co-operative strategy. This issue is empirically investigated at the industry level using data from 1975–1984. One of the main contributions of this study is the attempt to distinguish between strategic and non-strategic R&D. The results of this analysis indicate that depending on the extent of unionization, there is a significant amount of variation in the magnitude and direction of the impact of strategic R&D on import penetration. Supporting evidence also indicates that the union rent-seeking behaviour related to strategic R&D investments varies between import and export-competing industries.