Abstract
This paper investigates complementarity between firms’ participation in global value chains (GVCs) and R&D investment by employing a bivariate probit model and firm-level data of South Korea — 2014 Survey of Business Activities (SBA). We document complementary relationships between the two activities because each activity requires substantial fixed costs, but reinforces one another through cost reductions. Moreover, contrary to the findings of previous literature, we do not find that one-way trade and R&D investment are complementary. Lastly, complementarity between GVC participation and R&D investment holds at the intensive margins as well as at the extensive margin.
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