How Export Orientation Shapes Internal R&D Practices in African Firms: A Recursive Bivariate Copula Estimation

This study attempts to analyze the relationship between export orientation and domestic research and development (R&D) within the firms in Africa, emphasizing the conflict between export-oriented incentives to innovate and resource limitations based on data from the World Bank surveys. To capture the presence of endogenous correlation, a Recursive Bivariate Copula model is used. The findings indicate that there is an observed positive relationship between export orientation and internal R&D. The average treatment effect results confirm export orientation raises the probability of carrying out internal R&D by about 47%. However, the effect is heterogeneous; it is smaller (16%) for firms that are already engaged and insignificant for firms not engaged in export orientation. This suggests that R&D gains are concentrated among firms with stronger underlying capabilities. On top of this the results show a significant negative dependence between unobserved components of export orientation and R&D decisions, suggestive of latent resource constraints and trade-offs in firms’ strategic allocation. Overall, the findings reveal that export orientation increases internal R&D, but the relationship is unequal and driven by firms’ heterogeneity and structural restrictions, emphasizing the need for integrated policies that jointly boost R&D capabilities and export orientation in consideration of their latent dependence.