The R&D and innovation effects of firm-specific trade opportunities

This paper explores how firm-specific trade opportunities affect R&D investments and innovative activities. To construct trade opportunities that are exogenous to firm-level decisions, I use the variation in export and import patterns and exploit the fact that firms differ in their product-country exporting (sourcing) patterns. Both export and import opportunities generate growth in terms of sales, value-added, overall employees, and high-skilled employees. Despite having similar effects on firm growth, the effects on innovation activities are very different for the two trade shocks. Export opportunities lead to more R&D investments (spending, employees, and intensity) and innovations (product and process). On the other hand, import opportunities show no effects on R&D investments, and the impact on product, process, and service innovation is negative.