Firm R&D Investment and Export Market Exposure

Firm R&D Investment and Export Market Exposure

https://ift.tt/2Qls2Fl

Firm R&D Investment and Export Market Exposure

NBER Working Paper No. 25228
Issued in November 2018
NBER Program(s):International Trade and Investment, Productivity, Innovation, and Entrepreneurship

In this article we study differences in the returns to R&D investment between firms that sell in international markets and firms that only sell in the domestic market. We use German firm-level data from the high-tech manufacturing sector to estimate a dynamic structural model of a firm’s decision to invest in R&D and use it to measure the difference in expected long-run benefit from R&D investment for exporting and domestic firms. The results show that R&D investment leads to a higher rate of product and process innovation among exporting firms and these innovations have a larger impact on productivity improvement in export market sales. As a result, exporting firms have a higher payoff from R&D investment, invest in R&D more frequently than firms that only sell in the domestic market, and, subsequently, have higher rates of productivity growth. The endogenous investment in R&D is an important mechanism that leads to a divergence in the long-run performance of firms that differ in their export market exposure. Simulating the introduction of trade tariffs we find a substantial reduction in firms’ productivity growth and incentive to invest in R&D.

You may purchase this paper on-line in .pdf format
from SSRN.com ($5) for electronic delivery.

Acknowledgments

Machine-readable bibliographic record – MARC,
RIS,
BibTeX

Document Object Identifier (DOI): 10.3386/w25228

Publish

via NBER

November 12, 2018 at 08:01PM https://ift.tt/2Qls2Fl

Be the first to comment

Leave a Reply

Your email address will not be published.


*