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

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.