productivity. We do so by developing a quantitative model with heterogeneous firms and international trade where firms can invest … cover the fixed costs of sourcing foreign inputs, which in turn also has a benign impact on measured productivity. Using …&D investment play a key role in explaining firm-level productivity growth. Moreover, the estimated returns to R&D are significantly …

’ hypothesis that foreign research labs located on US soil tap into US R&D spillovers and improve home country productivity. Using … firms’ Total Factor Productivity would have been at least 5% lower in 2000 (about $14bn) in the absence of the US R&D growth …