Journal
AMERICAN ECONOMIC REVIEW
Volume 105, Issue 12, Pages 3704-3739Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/aer.20121530
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Funding
- Research Council of Norway [183522]
- Centre for the Study of Equality, Social Organization, and Performance (ESOP) at the Department of Economics at the University of Oslo
- Research Council of Norway
- ESRC [ES/M010341/1] Funding Source: UKRI
- Economic and Social Research Council [ES/M010341/1] Funding Source: researchfish
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This paper studies the impact of an R&D cost shock on R&D investments, imported inputs, and their joint impact on firm performance. We introduce imported inputs into a model of R&D and endogenous productivity, and show that R&D and international sourcing are complementary activities. Exploiting the introduction of an R&D tax credit in Norway in 2002, we find that cheaper R&D stimulated not only R&D investments but also imports of intermediates, quantitatively consistent with the model. An implication of our work is that improved access to imported inputs promotes R&D investments and, ultimately, technological change.
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