R&D and Foreign Sales in Swedish Multinationals: A Simultaneous Relationship?

This paper analyzes the simultaneous relationship between R&D and foreign sales in Swedish multinational enterprises (MNEs). We argue that this two-way relationship should especially apply to multinationals based in small economies due to the firms’ high dependence on foreign markets. The only previous study addressing this issue used data on multinationals from the United States, a country with a large domestic market, but did not find evidence of the hypothesized simultaneous relationship. Our empirical results suggest a positive two-way relationship between R&D and foreign sales.