R&D as a Source of the Resilience for Exporting Firms in the Face of Large Exchange Rate Movements.

This article examines the strategic challenges faced by Canadian exporters due to large fluctuations in the value of the Canadian dollar against major currencies, focusing on how firm-level research and development (R&D) investments influence exporters' economic resilience. Using detailed microdata from Canadian goods-producing firms between 2005 and 2019, the study finds that exporters engaging in R&D are more likely to sustain higher export volumes, output, employment, and survival probabilities during periods of Canadian dollar appreciation, when innovation and product distinctiveness become critical for competitiveness. Conversely, when the Canadian dollar is devalued, firms rely more on cost advantages, and the relative importance of R&D diminishes. The analysis also incorporates a gravity model of bilateral trade flows, confirming that R&D-intensive exporters maintain stronger export performance across different foreign markets despite exchange rate shocks. Overall, the findings highlight R&D investment as a key factor enhancing the resilience of Canadian exporters amid volatile exchange rate movements linked to global economic and commodity price fluctuations.