R&D expenditures and geographical sales diversification

Christopher F. Baum, Mustafa Caglayan, Oleksandr Talavera

Research output: Contribution to journalArticle

4 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)197-221
Number of pages25
JournalManchester School
Volume84
Issue number2
Early online date5 Feb 2015
DOIs
Publication statusPublished - Mar 2016

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