Trade in services and innovation

Bastian Krieger and Fabian Trottner

No 24-056, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We study the implications of services trade for firm innovation. Using a quasi-experimental shift-share design, we find that access to foreign knowledge-related services improves the innovativeness of domestic firms and complements their indigenously sourced R&D. To confront this evidence, we develop a theoretical model. It demonstrates outsourcing can foster firms' innovation efficiency by mitigating decreasing economies of scale in in-house innovation efforts. As a result, firms become more likely to outsource innovation efforts as they become more innovative, whereas the prevalence of offshoring depends on its associated trade costs.

Keywords: International integration; Service trade; Firm innovation (search for similar items in EconPapers)
JEL-codes: F14 F15 F23 O31 O32 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-bec, nep-cse, 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 (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:301867

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