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Importing, Exporting, and Innovation in Developing Countries

  • Murat Şeker

Several recent studies have shown that not only exporters but also importers perform better than firms that do not trade. Using a detailed firm level dataset from 43 developing countries, I show that there are persistent differences in evolution of firms when they are grouped according to their trade orientation as: two-way traders (both importing and exporting), only exporters, only importers, and non-traders. Extending the existing models of firm evolution in open economies by incorporating importing decision, I provide a simple model and empirically show that: i) globally engaged firms are larger, more productive, and grow faster than non-traders; ii) two-way traders are the fastest growing and most innovative group who are followed by only-exporters; and iii) estimating export premium without controlling for import status is likely to overestimate the actual value by capturing the import premium. Finally I show the robustness of the findings by providing evidence from the panel data constructed from the original dataset and controlling for variables that are likely to affect firm growth.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 20 (2012)
Issue (Month): 2 (05)
Pages: 299-314

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Handle: RePEc:bla:reviec:v:20:y:2012:i:2:p:299-314
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