R&D Expenditures and Geographical Sales Diversification
Baum, Christopher, Mustafa Caglayan, and Oleksandr Talavera. “R&D Expenditures and Geographical Sales Diversification”. Boston College Working Papers in Economics 794, 2012.
This paper empirically examines the role of diversification in export markets on firm-level R&D activities. 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 no evidence of reverse causality between R&D and sales diversification.