R&D expenditures and geographical sales diversification

C.F. Baum, M. Caglayan, O. Talavera

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


This paper empirically examines the role of diversification in export markets on firm‐level R&D activities taking account of the potential endogeneity in this relationship. 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 that R&D expenditures cause higher export sales but do not cause export sales diversification. Hence, the result that diversification causes higher R&D activity is not driven by reverse causality.
Original languageEnglish
Pages (from-to)197–221
Number of pages25
JournalManchester School
Issue number2
Early online date5 Feb 2015
Publication statusPublished - 23 Feb 2016


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