Firm R&D investment and export market exposure

Bettina Peters (bettina.peters@zew.de), Mark Roberts and Van Anh Vuong

No 18-047, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: 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.

Keywords: R&D choice; Export; Innovation; Productivity; Dynamic structural model (search for similar items in EconPapers)
JEL-codes: F14 L25 O31 O32 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cse, nep-ind, nep-ino, nep-int, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Firm R&D investment and export market exposure (2022)
Working Paper: Firm R&D Investment and Export Market Exposure (2018)
Working Paper: Firm R&D Investment and Export Market Exposure (2018)
Working Paper: Firm R&D Investment and Export Market Exposure (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:18047

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