Economics Webinar - High-skill Immigration, Offshore R&D, and Firm Dynamics

We study firms’ decision to use foreign R&D inputs—immigrant researchers and imported R&D services—and their impact on firm performance and aggregate productivity. Using Danish administrative data, we document that firms with immigrant researchers are more likely to source foreign R&D services, and that both immigrant researchers and imported R&D services enhance R&D efficiency and firm performance. We develop and estimate a model of firm dynamics that rationalizes these patterns. Counterfactual experiments highlight the crucial and complementary roles of immigrant researchers and imported R&D services in firm R&D. Without access to these inputs, both R&D participation and the aggregate return on R&D would decrease substantially.