Pre-Export R&D, Exporting and Productivity Gains: Evidence from Chinese Firms

Does entry into the export market enhance firms’ productivity? In this paper, we estimate the instantaneous and long-run effects of exporting on the productivity of Chinese manufacturing firms during 2001 and 2007. We argue that pre-export R&D plays a crucial role in generating post-entry productivity gains by increasing firms’ absorptive capacity. Adopting propensity score matching in our estimation, we find that: (1) On average, starting to export has an instantaneous effect in raising productivity by 2%, but there are no significant long-run effects. (2) Firms that have ever invested in R&D before exporting experience large and lasting productivity gains, while for firms without pre-export R&D the gains do not exist even instantaneously. (3) The productivity gains exporting are increasing in the number of years a firm invests in pre-export R&D.