Determinación de umbrales

Chapter A4 in this Internationalisation Monitor describes trends in Dutch R&D and innovation and benchmarks them in a European perspective. The figures reveal that enterprises that trade internationally invest higher sums of money and more often in R&D, and they tend to be more innovative. However, the same figures also reveal that international trading enterprises are, on average, larger than enterprises not involved in international trade. Enterprises that invest in R&D are also larger than enterprises that do not invest in R&D. So the size of an enterprise does seem to explain, to a certain extent, both the trading behaviour of enterprises and the likelihood of a company investing in R&D.

3.2.1 Self-selection effects and productivity

Scholars have researched this topic extensively. There is a large body of empirical literature that documents the relationship between exporting and productivity. In general, scholars find that exporting enterprises are more productive than non- exporting enterprises, which reflects the self-selection process of more productive enterprises in the export market (Girma et al., 2004). Productive enterprises have comparative advantage and start to export. Others state that exporting makes them even more productive (Aw, Roberts, Xu, 2008). This further increases their comparative advantage, which, in turn, leads to even more export. The productivity of enterprises correlates highly with the size of enterprises. Expansion enables enterprises to benefit from economies of scale by reducing unit cost, resulting in lower long-run average costs and therefore higher added value and increased productivity. Both R&D and export involve high fixed costs. So enlarging the scale of an enterprise, while keeping fixed costs constant, implies lower average fixed costs per unit. This explains why the figures in chapter A4 show that exporters and R&D enterprises are, on average, larger than non-exporters and enterprises that do not invest in R&D. The self-selection of productive enterprises drives them to participate in the export market or it drives them to start investing in R&D. Scholars find the self-selection effect for both embarking on export and for starting R&D activities. R&D and exporting have a positive effect on the enterprise’s future productivity which reinforces the selection effect (Aw, 2008). The question is therefore: how do enterprises achieve the initial productivity level that drives them to start export activities? Girma et al. (2004) state that profit-maximising firms enter export markets only if the present value of their profits exceeds the fixed costs of

entry. One may expect that the same applies when starting R&D activities. Enterprises generate profit when they manage to generate higher output value than input value. So profits depend on productivity, which is the function between operating inputs and outputs. Several types of input can be discerned: capital, labour, energy, materials, and services. A more efficient use of input increases productivity. R&D increases the probability of being involved in innovations that yield more efficient use of inputs. See Hall et al. (2009) for a review of the relevant literature on this topic. We conclude from this part of the literature that exporting and R&D involve high fixed costs. Enterprises require a certain level of productivity in order to be triggered to start exporting or investing in R&D. This self-selection effect is further reinforced by the productivity gains from exporting and innovating. So from this perspective there seems to be no direct relationship between exporting and R&D, other than the possibility that productivity gains achieved through export may drive enterprises to start R&D, and vice versa.

3.2.2 Innovation diffusion

Another relevant aspect of the interrelation between trade and R&D is that trade leads to innovation diffusion since international trade facilitates technology transfer. Many scholars argue that innovation diffusion is an important source of productivity growth. From his empirical research on 16 OECD countries for the period 1870–2004, Madsen (2007) concludes that there is a robust relationship between productivity and knowledge imports, and that 93 percent of the increase in productivity over the past century was thanks to knowledge import alone. Coe and Helpman (1995) also find that international transmission of R&D knowledge through the channel of trade has contributed significantly to productivity growth. “While R&D raises rates of innovation, international trade enhances the speed of technology transfer,” (Cameron et al., 2003). So R&D increases an enterprise’s odds for embarking on innovation, while international trade increases innovation diffusion. Technology transfer is particularly important for countries behind the technological frontier. Countries that are less developed in technological terms tend to converge quickly to steady-state levels of productivity when trading with countries at the technological frontier. So enterprises that innovate and trade provide their trading counterparts with productivity advantages in terms of technological development. The more educated and skilful the importers are, the better the adoption of the innovation will be and the faster and higher the productivity growth. “It may be seriously argued that, historically, European receptivity to new technologies, and the capacity to assimilate them whatever their origin, has been as important as inventiveness itself,” (Rosenberg, 1982). This indicates the relevance of the interrelation between R&D and international trade. For a comprehensive study on the diffusion of innovations see Rogers (2003). Hejazi (1999) adds foreign direct investment (FDI) stocks to international trade as a diffusion channel for R&D between countries. He argues that the importance of

the trade channel as a source of productivity growth is reduced once FDI is considered. Although the focus in this paper is on the interrelation between international trade and R&D, we also take FDI into account. FDI by foreign firms in the Netherlands is covered by the locus of control breakdown, since this indicates the foreign ownership of enterprises in the Dutch business sector. Knowledge from abroad may flow into the Netherlands via the FDI channel as a result of intra-firm knowledge spillovers when a foreign enterprise acquires or starts an enterprise in the Netherlands. FDI is also more appropriate for some types of knowledge transmission than the international trade channel (Hejazi, 1999). To conclude, the literature on innovation diffusion provides evidence for the importance of international trade as a facilitator of technology transfer and the cause of knowledge spillovers, resulting in productivity gains for the receiving counterpart.