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
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)
New Economics Papers: this item is included in nep-cse, nep-eur, nep-ino and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:201605
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