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

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Abstract

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.

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Notes

  1. Self-selection into the international market is supported by a number of prior empirical studies that use microdata (Bernard and Jensen 1995, 1999; Bernard et al. 2007; Head and Ries 2001, 2003; Kimura and Kiyota 2006; Tomiura 2007; Wakasugi et al. 2014).

  2. If a firm exports, \(E=1\); otherwise, \(E=0\).

  3. For simplicity, we consider the specific one-time investment required to employ an R&D strategy, and we assume that firms can enhance their productivity level by a certain amount by upgrading technology, following Bustos (2011) and Lileeva and Trefler (2010).

  4. In other words, we assume that the fixed costs for R&D and fixed domestic costs are high enough relative to the fixed exporting costs. More precisely, we impose the following parameter restriction: \(\phi _{E}=\frac{f_{E}}{\tau ^{-\epsilon }Y^{*}}<\min \left( \frac{f_{D}+f_{ IR }}{\delta Y},\frac{f_{D}+f_{ ER }}{\lambda Y},\frac{f_{D}+f_{ IR }+f_{ ER }}{\gamma Y}\right) .\)

  5. This paper does not provide a detailed technical explanation about QRs. For a brief introduction to QRs, see Koenker and Hallock (2001).

  6. In fact, the distribution of total factor productivity (TFP) is highly skewed. For both TFP and log of TFP, the skewness/kurtosis tests for normality and the Shapiro–Wilk/Shapiro–Francia tests for normality reject the normality at the 1 % significance level.

  7. The response rate of the METI survey is more than 80 % of the total population.

  8. The survey covers 195,344 firms for the period 2001–2007, with 27,906 firms per year (on average). Manufacturing firms account for approximately 53 % of the sample; the number of manufacturing firms was 92,512 firms for the period 2001–2007, i.e., there were 13,216 manufacturing firms per year (on average) in the sample.

  9. We use transportation and package costs to proxy unobserved productivity shocks since our data does not contain costs for electricity, materials, or fuels.

  10. Following prior studies such as Arnold and Hussinger (2010), we use the standard variables in the estimation of the production functions.

  11. The estimations results of the production function obtained using the Levinsohn and Petrin (2003) technique are shown in Table A.1 of the “Appendix”.

  12. Excluding non-exporters with any type of R&D reduces our sample from 92,512 to 69,644 firms. The restricted sample used in the analysis accounts for about 75 % of the full manufacturing sample. Including them in the analysis yielded qualitatively similar results, as reported in the “Appendix”.

  13. The results of the KS tests for the other years are available on request.

  14. However, the productivity premia of exporters with no R&D as compared to non-exporters are positive but insignificant when we include non-exporters with R&D in the category of non-exporters, as shown in Table A.4 in the “Appendix”.

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Acknowledgments

This study is part of the research project on “International Trade and Firms” of the Research Institute of Economy, Trade and Industry (RIETI). The authors are grateful to Masahisa Fujita, Masayuki Morikawa, Ryuhei Wakasugi, other seminar participants at RIETI, and participants at ETSG 2012 annual conference in Leuven for helpful comments and suggestions. The authors also thank the statistics offices of the Ministry of Economy, Trade and Industry (METI) and the RIETI for granting permission to access firm-level data. This work was supported by the JSPS Grants-in-Aid for Scientific Research Grant No. 26380315.

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Authors and Affiliations

  1. Senshu University, 2-1-1 Higashimita, Tama-ku, Kawasaki, Kanagawa, 214-8580, Japan

    Banri Ito

  2. Setsunan University, 17-8 Ikedanaka-machi, Neyagawa City, Osaka, 572-8508, Japan

    Ayumu Tanaka

Authors
  1. Banri Ito
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  2. Ayumu Tanaka
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Correspondence to Banri Ito.

Appendix: Estimations of input share and results using full sample

Appendix: Estimations of input share and results using full sample

See Tables A.1, A.2, A.3, A.4 and A.5.

Table A.1 Estimation results of production function at the 2-digit industry level
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Table A.2 Kolmogorov–Smirnov tests: exports and R&D status (2007): full sample
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Table A.3 Descriptive statistics of variables for quantile regressions: full sample
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Table A.4 Premia (dependent variable: ln TFP): full sample
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Table A.5 Test for the equality of the coefficients between R&D strategies: full sample
Full size table

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Ito, B., Tanaka, A. External R&D, productivity, and export: evidence from Japanese firms. Rev World Econ 152, 577–596 (2016). https://doi.org/10.1007/s10290-015-0240-y

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