Working Paper No. 1366

The Dynamic Impact of Exporting on Firm R&D Investment

Published: October 13, 2020Pages: 45Keywords: R&D; Innovation; Trade policy; ProductivityJEL-codes: F13; L60; L13; O30

The Dynamic Impact of Exporting on Firm R&D Investment Florin Maican, Matilda Orth, Mark J. Roberts and Van Anh Vuong


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. 

Counterfactual simulations show that trade restrictions lower both the expected return to R&D and R&D investment level, thus reducing an important source of the dynamic gains from trade. A 20 percent tariff on Swedish exports reduces the expected benefits of R&D by an average of 32.2 percent and lowers the amount of R&D spending by 13.9 percent in the high-tech industries. The corresponding reductions in the low-tech industries are 30.4 and 8.9 percent, respectively. R&D adjustments in response to export tariffs mainly occur on the intensive, rather than the extensive, margin.


Reference:

Maican, Florin, Matilda Orth, Mark J. Roberts and Van Anh Vuong (2020), "The Dynamic Impact of Exporting on Firm R&D Investment". IFN Working Paper No. 1366. Stockholm: Research Institute of Industrial Economics (IFN).

Matilda Orth

Contact

Ph: +46 8 665 45 31
Mob: +46 736 42 38 24
matilda.orth@ifn.se

Florin Maican

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Ph: +46 31 786 4866
Mob: +46 76 235 3039
florin.maican@ifn.se

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