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Are Exporters More Likely to Introduce Product Innovations?

Authors


  • We wish to thank two anonymous referees, all the people who commented on previous versions of this paper and the participants in all the seminars and conferences in which it was presented, among which are the workshop on ‘Innovation, Internationalization and Global Labor Markets’ (Turin), ICEEE (Ancona), EARIE (Toulouse), ETSG (Warsaw), SIE (Perugia), ITSG (Lecce) and the workshop on ‘Importers, Exporters, Productivity and Innovation’ (Perugia). We are indebted to Silvia Cerisola for valuable research assistance, to the ICE for making available to us data on detailed Italian exports by region and to Gianluca Santoni for help with the data. The authors gratefully acknowledge financial assistance from the FIRB project (N.RBNE03YT7Z) funded by the Italian Ministry of Education, University and Research and from the Efige project (N.225551) funded by the European Commission under the Seventh Framework Programme. The usual disclaimers apply.

Abstract

A firm’s export status may improve its ability to introduce product innovations (learning by exporting). We explore this idea using very rich firm-level data on Italian manufacturing, which enables us to control for many confounding factors in the exporting–product innovation link (i.e. selection on observable variables). We also make an attempt to address the potential self-selection of firms into exporting according to unobservable characteristics using an industry–province specific measure of firm distances from their most likely export markets, and of these export markets’ potentials as sources of presumably exogenous variations in export status using an instrumental variables strategy. We find that export status significantly increases the likelihood of introducing product innovations and that this effect is not fully captured by the channels commonly stressed by the theoretical literature, such as larger markets (and accordingly firm size) or higher investments in R&D. We argue that heterogeneity in foreign customers’ tastes and needs may explain our findings.

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