Swedish Business R&D and its Export Dependence

Sweden has seen a rise in business R&D intensities and dependence on exports to make its economy grow since the early 1990s. This paper examines the role of foreign sales for stimulating R&D as compared to a domestic sales effect. In line with the literature, we find in cross-sections from 1991 to 2001 that R&D rises proportionally to sales. But among manufacturing firms foreign sales is distinctly more strongly associated with an increase in R&D than domestic sales. For service firms domestic sales are as important as foreign. The results are consistent with the hypotheses that manufacturing firms more easily separate production from R&D, that they economize on transport costs and are subject to learning-by-export effects. In general, the results highlight the dependence and the role of openness for stimulating R&D in a small economy, especially among manufacturing firms.