6 ▌Abstract
1INTRODUCTIONIn a global world, <strong>export</strong>s are obviously one channel<strong>for</strong> increasing a nation’s growth and long-term wealth.This is especially true <strong>for</strong> industrialized small, openeconomies. For policy makers, it may sound attractiveto foster <strong>export</strong>s compared to o<strong>the</strong>r options <strong>of</strong> internationalization,such as <strong>for</strong>eign direct investment orlicensing. Although potential pr<strong>of</strong>its <strong>of</strong> <strong>for</strong>eign directinvestment and licensing would flow back to <strong>the</strong> homecountry as <strong>the</strong>y do with <strong>export</strong>s, <strong>export</strong> <strong>activity</strong> has<strong>the</strong> feature that employment would be maintained orincreased in <strong>the</strong> home country. Even if <strong>for</strong>eign directinvestment would exhibit higher expected pr<strong>of</strong>its incertain industries, keeping employment in <strong>the</strong> homecountry is certainly attractive <strong>for</strong> policy makers.What is a key variable that policy can use to influencelong-term <strong>export</strong> success, however? The literature usuallyanalyses <strong>the</strong> relationship between <strong>export</strong>s and productivity<strong>of</strong> a firm (see e.g. surveys by Wagner, 2007).In this paper, we take a slightly different perspective.R&D and innovation are typically seen as a major drivers<strong>of</strong> productivity growth (see e.g. Griliches, 1994;Hall and Mairesse, 1995) and thus also <strong>for</strong> <strong>export</strong>s <strong>of</strong>industrialized countries (Cassiman and Golovko, 2007,2010; Cassiman et al., 2010). Whereas <strong>the</strong> literatureon <strong>export</strong>s and productivity is vast, <strong>the</strong> relationshipbetween R&D and <strong>export</strong>s received less attention in<strong>the</strong> field (see e.g. Hirsch and Bijaoui, 1985; Eblingand Janz, 1999; Arnold and Hussinger, 2005). We areinterested in potential effects <strong>of</strong> policy and <strong>the</strong>re<strong>for</strong>estudy whe<strong>the</strong>r <strong>export</strong>s are stimulated by R&D. As <strong>the</strong>reis a reverse causality concern that R&D may be triggeredby <strong>export</strong> experience <strong>of</strong> <strong>the</strong> firms (see e.g. Eblingand Janz, 1999; Lachenmaier and Wössmann, 2006),we will use instrumental variable regressions. Theseregressions in turn allow using R&D subsidy variablesas instruments which will directly identify whe<strong>the</strong>rR&D subsidies can serve as policy tool <strong>for</strong> stimulating<strong>export</strong>s.We study <strong>the</strong> relationship between R&D <strong>activity</strong> and<strong>export</strong> <strong>of</strong> firms using data from Belgium. This countrycan be seen as a representative <strong>for</strong> a case study <strong>of</strong>a small, open European economy. For instance, Belgian’sGDP amounted to 345 billion EUR in 2008. Thetotal volume <strong>of</strong> <strong>export</strong>s amounted to 321 billion EUR.The growing <strong>importance</strong> <strong>of</strong> <strong>export</strong>s in an ever moreglobalized world is striking <strong>for</strong> Belgium: nominal GDPgrowth between 2001 and 2008 is about 33%, but <strong>the</strong>growth <strong>of</strong> <strong>export</strong>s amounts to 46%. (All figures mentionedhere were obtained from <strong>of</strong>ficial Eurostat statistics).Belgium’s high degree <strong>of</strong> openness can alsobe seen in both <strong>the</strong> inward and outward stocks <strong>of</strong> FDI.The FDI stocks as a percentage <strong>of</strong> GDP amounted to133 (122) inward (outward). The inward (outward) FDIstocks <strong>of</strong> o<strong>the</strong>r European countries are much lower:Austria 34 (37), Finland 32 (42), Denmark 44 (55),Ireland 62 (63), Sweden 53 (67) (Source: UNCTAD,2009).In terms <strong>of</strong> Gross Expenditure on R&D (GERD), Belgiumranges at about <strong>the</strong> EU27 average with a GERD to GDPratio <strong>of</strong> about 1.9% in 2007. However, Belgium is laggingbehind o<strong>the</strong>r small European countries in terms<strong>of</strong> R&D. Sweden’s R&D intensity reaches 3.9%, Finland’s3.5% and both Denmark’s and Austria’s about2.4% (Source <strong>for</strong> all R&D data: OECD Main Scienceand Technology Indicators). Thus, <strong>the</strong>re is potential <strong>for</strong>policy to increase R&D, and in turn possibly <strong>export</strong>s.Because <strong>of</strong> <strong>the</strong> exceptionally high openness <strong>of</strong> Belgium,and <strong>the</strong> consequential high presence <strong>of</strong> multinationalenterprises (MNEs), we consider two subsamples<strong>of</strong> firms. We compare <strong>the</strong> purely domestic firmswith <strong>the</strong> MNEs, that is, firms being ei<strong>the</strong>r a Belgian parentcompany or a Belgian subsidiary <strong>of</strong> a <strong>for</strong>eign parentcompany. To <strong>the</strong> best <strong>of</strong> our knowledge, this is <strong>the</strong>first study on <strong>the</strong> relationship between R&D and <strong>export</strong>investigating <strong>the</strong> scope <strong>for</strong> innovation policy and distinguishingbetween domestic firms and MNEs.We find that R&D subsidies indeed foster R&D ef<strong>for</strong>tsin <strong>the</strong> firm. In <strong>the</strong> full sample as well as in both subsamples<strong>the</strong>re is a positive effect <strong>of</strong> R&D on <strong>export</strong>per<strong>for</strong>mance.The remainder <strong>of</strong> <strong>the</strong> paper proceeds as follows: <strong>the</strong>second section discusses existing literature on <strong>export</strong>and R&D in more detail, <strong>the</strong> third section introduces<strong>the</strong> data and variables used. The empirical analysis ispresented in section four, and <strong>the</strong> final section concludes.Introduction ▌7