Valerie Smeets, Aarhus University

"High-Skill Immigration, Offshoring R&D, and Firm Dynamics"

Abstract

Foreign inputs in the form of immigrant researchers and imported R&D services play an increasingly important role in firm’s R&D activities. This paper studies firms’ decision to use such inputs and its implications for firm performance and aggregate productivity. Using administrative data from Denmark, we document that firms with immigrant researchers are more likely to source R&D services from abroad, and that the use of both inputs increases R&D efficiency and boosts firm performance. We develop and estimate a firm dynamics model in which R&D can be done with a combination of domestic inputs, immigrant re- searchers, and imported R&D services. Two elements of the model—love for variety of ideas in R&D and an information channel of immigrants—imply complementarity between differ- ent R&D inputs, which is crucial to rationalize the empirical patterns on firm’s R&D. Coun- terfactual experiments show that incorporating the use of foreign R&D inputs in the model is important for assessing the impacts of immigration, service offshoring, and R&D policies.

Joint work with Jingting Fan, (The Pennsylvania State University) and Eunhee Lee (University of Maryland)

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Contact person Casper Worm Hansen