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In this paper, we investigate how market integration affects firms’ technologychoices. Although market integration encourages cost-reducing research anddevelopment (R&D) investments in many cases, it may discourage it in two cases:(1) when market sizes are quite different and the effects of R&D are not so high,market integration may discourage R&D in a large country; and (2) if the firm ina large country only invests in the segmented market, market integration maydiscourage R&D in a large country, while encouraging it in a small country.These results correspond to data about R&D intensities in European Unioncountries. JEL classification: F02, F15, L13, O31