From Innovation to Exporting or Vice Versa?

Authors


  • We thank two anonymous referees for very helpful comments and suggestions. We also thank participants at the Empirical Investigations in International Economics 2008 conference in Ljubljana; the Exports, Imports, Productivity workshop at the University of Perugia; the ISGEP workshop at the University of Nottingham, and the workshops of two EU-funded Sixth Framework Programme projects MICRO-DYN and DYNREG for helpful comments.

  • The paper was produced in the framework of MICRO-DYN (http://www.micro-dyn.eu/), funded by the EU Sixth Framework Programme (http://www.cordis.lu/). This publication reflects only the authors’ views; the European Commission is not liable for any use that may be made of the information contained therein.

Abstract

Firm productivity and export decisions are closely related to innovation activity. Innovation may play a more important role in the decision to start exporting, and successful exporting may drive process innovation. This suggests that the causality between innovation and exporting may run in both directions. Using detailed microdata from innovation surveys, industrial production surveys, and trade information for Slovenian firms in 1996–2002, we investigate the bidirectional causal relationship between firm innovation and export activity. We find no evidence for the hypothesis that either product or process innovations increase the probability of becoming a first-time exporter, but we do find evidence in both the innovation survey and the industrial production survey that exporting leads to productivity improvements. These, however, are likely to be related to process rather than product innovations, and are observed only in a sample of medium and large first-time exporters. This finding makes a case in favour of the learning-by-exporting hypothesis by demonstrating that these learning effects from exporting occur through the mechanism of process innovation enhancing firm technical efficiency.

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