Working Paper: CEPR ID: DP7846
Authors: Ilke Vanbeveren; Hylke Vandenbussche
Abstract: We analyze the relationship between firm-level innovation activities and firms? propensity to start exporting for firms in a small open economy. We measure innovation by innovative effort (R&D) as well as by innovative output (product and process innovation). After carefully correcting for endogeneity and selection issues, the evidence points to firms self-selecting into innovation in anticipation of their entry into export markets, rather than product and process innovation triggering entry into the export market. These results suggest that governments can foster firm-level innovation through trade liberalization.
Keywords: exports; process innovation; product innovation; R&D; self-selection
JEL Codes: D24; F14; L25; O31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| self-selection into innovation (O36) | anticipation of entering export markets (F10) |
| product innovation (O35) | likelihood of firms starting to export (F10) |
| process innovation (O31) | likelihood of firms starting to export (F10) |
| product innovation + process innovation (O31) | likelihood of firms starting to export (F10) |
| product innovation + process innovation (O31) | propensity to export (F10) |
| firms that innovate (O31) | anticipation of entering export markets (F10) |