The relationship between R&D investments and exports in the Netherlands

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We investigate the relationship between R&D and export of goods and services, and the role of productivity therein, using firm-level data from the Netherlands for the period 2013-2018.
We apply a three-stage least squares (3SLS) Generalized Method of Moments (GMM) estimation to empirically address the concerns of endogeneity and heteroscedasticity. Our results are in line with most previous studies and suggest that there is complementarity between R&D and export activities. We find that the effect of R&D on exports is stronger than the reverse effect of exports on R&D. This finding is driven by export of goods. For export of services, by contrast, the channel from exports to R&D is much stronger than from R&D to exports. Our results show that more productive firms engage more strongly in exports and they invest more in R&D. Heterogeneity analyses suggest that the complementarity between R&D and export activities varies across different types of firm and by export destination and type of product. As such, complementarity between two activities is stronger for larger firms. The effect of R&D on non-EU exports appears to be stronger than vice versa. Returns to R&D are higher from exports to low income economies, whereas investment in R&D has a much stronger effect on exports to high- and middle-income economies. The evidence further suggests that any additional R&D investments associated with a tax credit, indirectly also benefit the export activities of these firms. Our findings show that spill-over effects between R&D and exports should be considered in designing policies targeted at R&D or international trade.