R&D expenditures and geographical sales diversification

Christopher F. Baum, Mustafa Caglayan, Oleksandr Talavera

Research output: Contribution to journalArticle

Abstract

This paper empirically examines the role of diversification in export markets on firm-level R&D activities taking account of the potential endogeneity in this relationship. We show that geographical sales diversification across different regions of the world induces UK firms to increase their R&D expenditures, as firms must innovate and develop new products to maintain a competitive edge over their rivals. This finding is robust to a battery of sensitivity checks. Furthermore, we find that R&D expenditures cause higher export sales but do not cause export sales diversification. Hence, the result that diversification causes higher R&D activity is not driven by reverse causality.

LanguageEnglish
Pages197-221
Number of pages25
JournalManchester School
Volume84
Issue number2
Early online date5 Feb 2015
DOIs
StatePublished - Mar 2016

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Diversification
Expenditure
New products
Endogeneity
Causality
Export markets

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Baum, Christopher F. ; Caglayan, Mustafa ; Talavera, Oleksandr. / R&D expenditures and geographical sales diversification. In: Manchester School. 2016 ; Vol. 84, No. 2. pp. 197-221
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R&D expenditures and geographical sales diversification. / Baum, Christopher F.; Caglayan, Mustafa; Talavera, Oleksandr.

In: Manchester School, Vol. 84, No. 2, 03.2016, p. 197-221.

Research output: Contribution to journalArticle

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Baum CF, Caglayan M, Talavera O. R&D expenditures and geographical sales diversification. Manchester School. 2016 Mar;84(2):197-221. Available from, DOI: 10.1111/manc.12092