External R&D, productivity, and export: evidence from Japanese firms

This study theoretically and empirically examines the productivity sorting pattern of the joint decisions related to research and development (R&D) strategies and exporting status using a simple theoretical framework that extends the firm heterogeneity model to account for both internal (a firm's own R&D) and external (outsourcing R&D or technology purchase) R&D strategies. The empirical results from the nonparametric and semiparametric methods using Japanese firm-level data show that exporting firms engaged in R&D activities are more productive than non-exporters and exporters with no R&D, regardless of whether internal or external R&D strategy is adopted; further, exporters that employ both the R&D strategies are the most productive. The results suggest that the external R&D strategy is complementary to the in-house R&D strategy and is crucial for promoting the innovations of internationalized firms.