R&D, export and productivity in business services firms: testing the Bustos model

Abstract

This article uses data for Danish business services firms to analyse the nexus between the decision to export, invest in R&D and firm productivity. Testing the hypothesis derived by Bustos (2011) by the use of a nonparametric test for differences in stochastic productivity distributions, see Delgado et al. (2002); it is found that the productivity distribution of exporting business services firms dominates the productivity distribution of nonexporting firms who do not invest in R&D. Except for 2007, this result holds for all the years included in the sample, i.e. 2007–2010. Exporting firms that are R&D active are more productive than nonexporting firms without R&D in all years between 2007 and 2010. This result is in accordance with Vogel and Wagner (2013) who test the Bustos model with German data for business services firms. The results are mixed when testing productivity differences for non-R&D active exporting firms with exporting firms that are R&D active. In this case the Bustos hypothesis holds only for 2009. Export of services has become increasingly important in foreign trade for developed countries. And the results add to the sparse empirical evidence on the interplay between R&D, export and productivity for firms in the business services industry.