The Dynamic Impact of Exporting on Firm R&D Investment

This article estimates a dynamic structural model of firm R&D investment in twelve Swedish manufacturing industries and uses it to measure rates of return to R&D and to simulate the impact of trade restrictions on the investment incentives. R&D spending is found to have a larger impact on firm productivity in the export market than in the domestic market. Export market profits are a substantial source of the expected return to R&D.