This paper empirically analyses the determinants of ¢rm participation in Research Joint Ventures (RJVs). A review of the theoretical literature highlights the di¤culty of identifying testable hypotheses. Using a large database of European RJVs, we estimate a participation equation at the ¢rm level using the logit procedure. We ¢nd that sectorial R&D intensity, industry concentration, ¢rm size, technological spillovers, and past RJV participation positively in£uence the probability of forming RJVs. By contrast, patents' e¡ectiveness reduce the likelihood of RJV formation. Last, country ¢xed e¡ects suggest that ¢rms from larger countries are less likely to participate in cross-border RJVs.

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This paper presents a simple model to analyze the effect of geographically localized spillovers on the internationalization decision of firms. It is shown that, once spatially bounded externalities are taken into account, the standard predictions on the nature and direction of foreign direct investment (FDI) flows may be reversed. We highlight three effects. First, an FDI‐en‐hancing effect: the presence of spillovers increases the profitability of the FDI strategy when the competitive gap between firms is narrow. Second, a dissipation effect: firms may refrain from investing abroad for fear of diffusion of their firm‐specific assets. Third, a sourcing effect: the presence of spillovers may induce a firm to invest abroad, even in the absence of exporting costs.

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