In this paper we investigate the causal relationship between firm's innovation and exporting activity by using detailed firm-level data on innovation activity, financial variables and information on trade for Slovenian firms in 1996-2002. We employ the bivariate probit regression on a system of innovation and exporting equations as well as matching procedures to tease out the direction of causality between exporting status and innovation activity. Our results suggest a strong positive relationship between exporting and innovation activity in both directions, while results on the impacts of lagged export (or innovation) status on the probability to start innovating (or exporting) are less conclusive. In other words, whereby innovating status increases the probability of exporting it does not increase the probability of becoming a first time exporter, and vice versa. The results remain unaltered also after allowing for discrimination between product and process innovation.
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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number
DYNREG22.
Length: Date of creation: 2008 Date of revision: Handle: RePEc:esr:wpaper:dynreg22
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Find related papers by JEL classification: D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
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