I analyze differences in the innovativeness of domestic firms and subsidiaries of foreign firms operating in the same country. I argue that domestic firms suffer a liability of localness in innovation, or a competitive disadvantage in product innovation relative to subsidiaries of foreign firms....

Innovation is important for the competitive advantage of firms, especially for service firms. We argue that public funding, such as that from national and international agencies, is likely to have a positive influence on firms' innovations by complementing private funding, such as that from...