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Firm R&D Investment and Export Market Exposure

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  • Bettina Peters
  • Mark J. Roberts
  • Van Anh Vuong

Abstract

We study differences in the returns to R&D investment between German manufacturing firms that sell in international markets and firms that only sell in the domestic market. Using firm-level data for five high-tech manufacturing sectors, we 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 domestic firms and, subsequently, have higher rates of productivity growth. We use the model to simulate the introduction of export and import tariffs on German exporters, and find that a twenty-percent export tariff reduces the long-run payoff to R&D by 24.2 to 46.9 percent for the median firm across the five industries. Overall, export market participation contributes significantly to the firm's return on R&D investment, which in turn, raises long run productivity and firm value providing a source of dynamic gains from trade.

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  • Bettina Peters & Mark J. Roberts & Van Anh Vuong, 2018. "Firm R&D Investment and Export Market Exposure," NBER Working Papers 25228, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25228
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    4. Enrico Vanino & Stephen Roper & Bettina Becker, 2020. "Knowledge to Money: Assessing the Business Performance Effects of Publicly Funded R&D Grants," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(04), pages 20-24, January.
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    7. Peters, Bettina & Roberts, Mark J. & Vuong, Van Anh, 2022. "Firm R&D investment and export market exposure," Research Policy, Elsevier, vol. 51(10).
    8. Yoshihiko Hogen & Yojiro Ito & Kenji Kanai & Naoya Kishi, 2024. "Changes in the Global Economic Landscape and Issues for Japan's Economy," Bank of Japan Working Paper Series 24-E-3, Bank of Japan.
    9. Mokthtari Moughari, Mahdieh & Daim, Tugrul U., 2023. "Developing a model of technological innovation for export development in developing countries," Technology in Society, Elsevier, vol. 75(C).
    10. Juan A. Máñez Castillejo & Oscar Vicente-Chirivella, 2019. "Exports of Spanish manufacturing firms and financial constraints," Working Papers 1921, Department of Applied Economics II, Universidad de Valencia.
    11. Liu, Mengxiao & Wang, Luhang & Yi, Yimin, 2022. "Quality Innovation, Cost Innovation, Export, and Firm Productivity Evolution: Evidence from the Chinese Electronics Industry," MPRA Paper 113270, University Library of Munich, Germany.
    12. Xiekui Zhang & Baocheng Yu, 2023. "The Impact of Ownership Structure on Technological Innovation and Energy Intensity: Evidence from China," Sustainability, MDPI, vol. 15(11), pages 1-18, May.

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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