R&D Effects on Firm Productivity, Exports, and OFDI: Korean Firm-Level Analysis

5 Pages Posted: 28 Apr 2016 Last revised: 29 Apr 2016

See all articles by Seungrae Lee

Seungrae Lee

Korea Institute for International Economic Policy

Ji Hyun Park

Korea Institute for International Economic Policy

Hyuk-Hwang Kim

Korea Institute for International Economic Policy

Joun Won Lee

Korea Institute for International Economic Policy

Date Written: October 8, 2015

Abstract

This report empirically analyzes the effects of firm R&D on firm performance, particularly on firm productivity, exports, and outward foreign direct investment (OFDI) by using Korean firm-level data. While this report lies in line with prior literatures that examined firm R&D effects on firm performance, we further explores the pathway connection between the two. That is, we not only examine firm R&D effects on particular firm performance, but also study the significance of firm productivity as a pathway that links firm R&D with firm exports and OFDI. Our estimation results indicate that firm R&D significantly heightens firm performance, particularly by showing stronger impact on firm performance over time. On the other hand, by using firm productivity as a mediator variable in a triangular structural equation to estimate direct R&D effects and indirect R&D effects through firm productivity, our results show that firm R&D has significant effects on export and OFDI increase directly and indirectly through firm productivity increase. Examining direct and indirect firm R&D effects across different industry sectors, we found that firm R&D is significantly effective on exports and OFDI among capital-intensive sectors, while it does not exhibit a significant influence among labor-intensive sectors. Our estimation results imply that while R&D promotion policies towards the private sector are effective for improving firm performance, these policies would yield more effective consequences if they are targeted at specific industry sectors. In particular, our results suggest that R&D promotion policies towards firms inside capital-intensive sectors would be more effective on exports and OFDI than policies towards firms inside labor-intensive sectors.

Keywords: Firm R&D, productivity, exports, OFDI

Suggested Citation

Lee, Seungrae and Park, Ji Hyun and Kim, Hyuk-Hwang and Lee, Joun Won, R&D Effects on Firm Productivity, Exports, and OFDI: Korean Firm-Level Analysis (October 8, 2015). KIEP Research Paper No. World Economy Update-15-20. Available at SSRN: https://ssrn.com/abstract=2771084 or http://dx.doi.org/10.2139/ssrn.2771084

Seungrae Lee (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Ji Hyun Park

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Hyuk-Hwang Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Joun Won Lee

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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