This paper studies the impact of an R&D cost shock on R&D investments, imported inputs, and their joint impact on firm performance. We introduce imported inputs into a model of R&D and endogenous productivity, and show that R&D and international sourcing are complementary activities. Exploiting the introduction of an R&D tax credit in Norway in 2002, we find that cheaper R&D stimulated not only R&D investments but also imports of intermediates, quantitatively consistent with the model. An implication of our work is that improved access to imported inputs promotes R&D investments and, ultimately, technological change.

Two identical firms who start exporting in different months, one each in January and December, will report dramatically different exports for the first calendar year. This partial-year effect biases down first-year export levels and biases up first-year export growth rates. For Peruvian exporters, the partial-year bias is large: first-year export levels are understated by 54 percent and the first-year growth rate is overstated by 112 percentage points. Correcting the partial-year effect dramatically reduces first-year export growth rates, raises initial export levels, and almost doubles the contribution of net firm entry and exit to overall export growth.