Firm R&D investment and export market exposure

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 18-047

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade ; Firm Performance: Size, Diversification, and Scope ; Innovation and Invention: Processes and Incentives ; Management of Technological Innovation and R&D
• Subject: R&D choice ; Export ; Innovation ; Productivity ; Dynamic structural model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Peters, Bettina ; Roberts, Mark J. ; Vuong, Van Anh
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/186124
• Last update: 10.03.2025, 11:44 AM CET