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R&D, Export, and Investment Decision

Oliviero Carboni and Giuseppe Medda ()

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: This paper provides an empirical analysis of the mechanism through which R&D and export influence investment decision. The analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries. To control for reverse causality between export decision and R&D spending and investment, we use an instrumental variable analysis to overcome the problem of endogeneity. Employing a three step procedure, it is assumed that R&D decision is endogenously determined by receiving public subsidies, and, in turn, affect investments through its impact on engagement by the firm in international trade. The results suggest that R&D positively affects export propensity. We find that there is an average increase in propensity to invest for those firms which decide to engage in R&D activities. The results also reveal that the effect of decision to export on investment behaviour is positive and highly significant, when accounting for endogeneity of export activity.

Keywords: r&d; IV model; export (search for similar items in EconPapers)
JEL-codes: B22 F14 O32 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cse, nep-eur, nep-ino and nep-int
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https://crenos.unica.it/crenos/node/6564
https://crenos.unica.it/crenos/sites/default/files/WP16-05.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:201605

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