R&D, export and investment decision: evidence from European firms

ABSTRACT

This article provides an empirical investigation of the mechanism through which R&D influences export and tangible investment decisions. The analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries. The novelty of this work lies in the three aspects. First, we expand the results on the R&D–export and R&D–investment relationships to a wide sample of cross-European firms. This differentiates from previous works based on single-country samples. Second, to the best of our knowledge, this study is the first in years which assess empirically the relationship between R&D and tangible investment at the micro level. Third, we control for endogeneity of R&D and simultaneity in firms’ decision whether to export and carry out tangible investment. The results of the analysis suggest that R&D positively affects export propensity and tangible investment. The results also reveal that neglecting endogeneity and simultaneity issues leads to underestimate the effect of R&D to both export and investment propensities.

KEYWORDS:

• R&D
• export
• tangible investment
• IV model

JEL CLASSIFICATION:

• O32
• F14
• C36
• B22

Disclosure statement

No potential conflict of interest was reported by the authors.​​​

Notes

¹ Griliches (1979) highlighted the importance of separating R&D from other inputs in studies of productivity or other performance variables.

² STATA code for sample and estimations are available upon request.

³ Using the same data set, Barba Navaretti, Castellani, and Pieri (2014) found that belonging to a national group does not affect propensity to export, while foreign ownership is positively correlated with exports.