Firm R&D investment and export market exposure


Peters, Bettina ; Roberts, Mark J. ; Vuong, Van Anh


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URL: https://ub-madoc.bib.uni-mannheim.de/47594
URN: urn:nbn:de:bsz:180-madoc-475941
Document Type: Working paper
Year of publication: 2018
The title of a journal, publication series: ZEW Discussion Papers
Volume: 18-047
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: F14 , L25 , O31 , O32,
Keywords (English): R&D choice , export , innovation , productivity , dynamic structural model
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.

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Peters, Bettina ; Roberts, Mark J. ; Vuong, Van Anh (2018) Firm R&D investment and export market exposure. Open Access ZEW Discussion Papers Mannheim 18-047 [Working paper]
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