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This paper empirically explores effects of design competence on firms’ performance using 2013 design industry statistical survey data conducted by the Ministry of Industry, Trade and Resources. The paper controls for endogeneity of design competence using a two stage Tobit-LS and Probit-LS procedures. The main empirical results are summarized as follows. First, empirical results show that design investment per employee for design-using firms can have positive effects on production and productivity. Second, the empirical results show that an investment in design systems of design-utilizing firms can affect their production and labor productivity. Among 4 types of investment in design system in the design-utilizing firms, investment in tools and equipment for design and intellectual property rights are found to be positively associated with the firm productivity. Finally, estimated coefficients for the patent dummy variable are not statistically significant in the simple OLS estimation but they turn out to be significant by using the 2 stage Probit-LS procedures. This implies that ignoring the endogeneity of the patent variable can produce biased results.