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| Exchange Rate Movements and Firms’ R&D Investments |
| LIU Qiren, HUANG Jianzhong
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College of Economics, Jinan University;
School of Business, Shanghai University of International Business and Economics |
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Abstract This paper analyzes the effect of exchange rate movements on exporters’ R & D investments, using 2008-2011 merged firm-level data from “China’s National Tax Survey (CNTS)” and “Census of Export Transactions”. Specifically, we expand Aghion et al. (2009) model to empirically investigate exports’ R&D decisions and intensity. We find significant negative impacts of firm-level real exchange rate appreciation and volatility risk on both exports’ R&D investments probability and intensity. However, the adverse effects are proportional to exports’ financial constraint level, exporters with softer constraints are better able to insulate their R&D investment from exchange rate movements. Furthermore, exporters with more government supports also document less adverse effects. Other sources of heterogeneity, such as export product variety, export destination variety and markup also matter. The results appear robust to different measures of firm-level exchange rate, subsamples, and econometric specifications.
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Received: 13 June 2016
Published: 18 January 2018
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