Export Performance and Innovation Activities in the Agrifood Industry: A Recursive Estimation Approach

Agrifood firms operate in a more global, saturated and competitive market than other manufacturing firms, and they have smaller size. These firms certainly need to define appropriate strategies related to accessing the international market and to investing in innovative activities. This two decisions are related to firms size because as Krugman states international trade is not only explained by differences in technology between countries but also by firms' desire to extend their sales in foreign markets to take advantage of the economies of scales. Therefore, it seems to exist a simultaneous relation between firm size, exports and innovative activities. The aim of this paper is to analyse agrifood firms' decisions on these three strategies: export behaviour, innovative activities and firm's size in comparison to other manufacturing firms using some modification from the simultaneous model defined by Entorf and Pohlmeier. The study is focused on the Spanish manufactured firms taking special attention to the agri-food ones. Data come from a National Survey ("Encuesta de Estrategias Empresariales") carried out by the "Fundacion Empresa Publica") from 1990. Results indicate that agri-food manufacturing firms decision process related to their size, export share and innovative activities is not a simultaneous process. Moreover, some differences with the rest of manufactured firms have been detected, In particular, agri-food firms have lower export shares, lower size and lower innovation intensity than Spanish firms in other manufacturing sectors. Spanish firms decision process on strategic variables (size, export share and innovation) is characterized by a recursive decision process where firms firstly decide export intensity, secondly, they decide their size or total sales depending on the previous decision and, finally, they decide their innovative intensity depending on the last two.