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Internationalization and Innovation of Firms: Evidence and Policy

  • Carlo Altomonte
  • Tommaso Aquilante
  • Gábor Békés
  • Gianmarco I. P. Ottaviano

We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium-to-long term, internationalization is driven by innovation. We recommend coordination and integration of internationalization and innovation policies 'under one roof' at both the national and EU levels, and propose a bigger coordinating role for EU institutions.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Special Papers with number 032.

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Date of creation: Apr 2014
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Handle: RePEc:cep:cepsps:032
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