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The Link between Innovation and Export: Evidence from Australiafs Small and Medium Enterprises


    (Alfons PALANGKARAYA Melbourne Institute of Applied Economic and Social Research and the Intellectual Property Research Institute of Melbourne)

This paper investigates the direction of causality between export market participation and innovation using firm level data from Australia. Using the propensity score matching approach, the paper asks whether: (i) exporting in the current period is positively correlated with the probability to innovate in the same or the next period, (ii) the relationship in (i) is true for firms who have no export market participation in the previous period, (iii) innovating in the current period leads to export market participation in the same or the next period, and (iv) the relationship in (iii) is true for firms who have no innovation in the previous period. The paper finds a statistically and economically significant positive correlation between export and innovation in the current period. Furthermore, with regards to the direction of causality, there is evidence that it runs both ways for process innovation particularly for the services sector. For product innovation, there is evidence that current product innovator may lead to a higher probability of becoming enewf exporter in the current period.

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Paper provided by Economic Research Institute for ASEAN and East Asia (ERIA) in its series Working Papers with number DP-2012-08.

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Length: 41 pages.
Date of creation: 01 Jun 2012
Date of revision:
Handle: RePEc:era:wpaper:dp-2012-08
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  1. Gustavo Crespi & Chiara Criscuolo & Jonathan Haskel, 2006. "Productivity, exporting and the learning-by-exporting hypothesis: direct evidence from UK firms," LSE Research Online Documents on Economics 19857, London School of Economics and Political Science, LSE Library.
  2. Alfons Palangkaraya & Jongsay Yong, 2007. "Trade Liberalisation, Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments," DEGIT Conference Papers c012_026, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Ilke Van Beveren & Hylke Vandenbussche, 2010. "Product and process innovation and firms' decision to export," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 13(1), pages 3-24.
  4. Megan MacGarvie, 2006. "Do Firms Learn from International Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 46-60, February.
  5. Paul H. Jensen & Elizabeth Webster, 2006. "Firm Size and the Use of Intellectual Property Rights," The Economic Record, The Economic Society of Australia, vol. 82(256), pages 44-55, 03.
  6. Long, Ngo Van & Raff, Horst & Stähler, Frank, 2011. "Innovation and trade with heterogeneous firms," Journal of International Economics, Elsevier, vol. 84(2), pages 149-159, July.
  7. Ana Margarida Fernandes & Caroline Paunov, 2010. "Does Trade Stimulate Innovation?: Evidence from Firm-Product Data," OECD Development Centre Working Papers 286, OECD Publishing.
  8. Jože P. Damijan & Črt Kostevc & Sašo Polanec, 2010. "From Innovation to Exporting or Vice Versa?," The World Economy, Wiley Blackwell, vol. 33(3), pages 374-398, 03.
  9. Arundel, Anthony & Kabla, Isabelle, 1998. "What percentage of innovations are patented? empirical estimates for European firms," Research Policy, Elsevier, vol. 27(2), pages 127-141, June.
  10. Sascha Becker & Peter Egger, 2013. "Endogenous product versus process innovation and a firm’s propensity to export," Empirical Economics, Springer, vol. 44(1), pages 329-354, February.
  11. Sourafel Girma & Holger Görg & Aoife Hanley, . "R&D and exporting: A comparison of British and Irish firms," Discussion Papers 07/18, University of Nottingham, GEP.
  12. Alfons Palangkaraya & Jongsay Yong, 2007. "Exporter and Non-Exporter Productivity Differentials: Evidence from Australian Manufacturing Establishments," Melbourne Institute Working Paper Series wp2007n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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