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The Complementary Role of Exports and R&D Investments as Sources of Productivity Growth

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  • Bee Yan Aw
  • Mark J. Roberts
  • Tor Winston

Abstract

This paper examines two potential channels of knowledge acquisition that underlie firm productivity growth in the Taiwanese electronics industry: participation in the export market and investments in R&D and/or worker training. We focus on the argument that a firm's own investments in R&D are necessary for the firm to assimilate knowledge or expertise gained from foreign contacts and thus are an important component of the process of learning-by-exporting. Firm-level panel data from 1986, 1991, and 1996 is used to investigate a firm's decision to invest in these two activities and to assess the effects of these investments on the firm's future total factor productivity. The empirical model consists of four equations. The firm's decisions to export and invest in R&D and/or worker training are modeled with a bivariate probit model that recognizes the interdependence of the decisions. We then estimate how participation in these investment activities alters the firm's future productivity trajectory while controlling for the potential selection bias introduced by endogenous firm exit. The primary empirical findings are that, on average, firms that export but do not invest in R&D and/or worker training have significantly higher future productivity than firms that do not participate in either activity. In addition, firms that export and invest in R&D and/or worker training have significantly higher future productivity than firms that only export. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11774.

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Date of creation: Nov 2005
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Publication status: published as The World Economy, 2007, Wol. 30, No. 1 (January), pp. 83-104
Handle: RePEc:nbr:nberwo:11774

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  1. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  2. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "learning-by-exporting" important? Micro-dynamic evidence from Colombia, Mexico and Morocco," Finance and Economics Discussion Series 96-30, Board of Governors of the Federal Reserve System (U.S.).
  3. Jin-Tan Liu & Meng-Wen Tsou & James Hammitt, 1999. "Export activity and productivity: Evidence from the Taiwan electronics industry," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(4), pages 675-691, December.
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  7. John R. Baldwin & Wulong Gu, 2004. "Trade Liberalization: Export-market Participation, Productivity Growth, and Innovation," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 372-392, Autumn.
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  12. Bernard, A. & Wagner, J., 1996. "Exports and Success in German Manufacturing," Working papers 96-10, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Robert E Lucas, 1999. "Making a Miracle," Levine's Working Paper Archive 2101, David K. Levine.
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  18. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
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Citations

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Cited by:
  1. World Bank, 2007. "Bangladesh : Strategy for Sustained Growth, Volume 1. Summary Report," World Bank Other Operational Studies 7765, The World Bank.
  2. Jože P. Damijan & Črt Kostevc, 2011. "Firms' Pattern of Trade and Access to Finance," LICOS Discussion Papers 27811, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  3. Kathuria, Vinish & Seethamma Natarajan, Rajesh Raj & Sen, Kunal, 2010. "State business relations and manufacturing productivity growth in India," MPRA Paper 20314, University Library of Munich, Germany.
  4. Pradhan, Jaya Prakash, 2010. "R&D strategy of small and medium enterprises in India: Trends and determinants," MPRA Paper 20951, University Library of Munich, Germany.
  5. Fernandes, Ana Margarida, 2006. "Firm Productivity in Bangladesh Manufacturing Industries," Policy Research Working Paper Series 3988, The World Bank.
  6. David Greenaway & Richard Kneller, 2007. "Industry Differences in the Effect of Export Market Entry: Learning by Exporting?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(3), pages 416-432, October.
  7. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
  8. Jože.P.Damijan & Črt. Kostevc, 2010. "Learning from trade through innovation: Causal link between imports, exports and innovation in Spanish microdata," LICOS Discussion Papers 26410, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  9. Abbas Aminifard Author_Email: aaminifard@yahoo.com & Karim Azarbaijani & Seyed Komail Tayebi, 2011. "Trade Liberalization And Unobservable Productivity In Iran'S Manufacturing Industry: An Application Of Olley -Peaks Approach ," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-252, Conference Master Resources.
  10. Abbas Aminifard & Karim Azarbaijani & Seyed Komail Tayebi, 2010. "The Impact of Trade Liberalization on Iran's Manufacturing TFP: An Application of Olley -Peaks Approach," Iranian Economic Review, Economics faculty of Tehran university, vol. 15(1), pages 101-116, winter.

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