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Causal Link between Exporting and Innovation Activity. Evidence from Slovenian Firms

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  • Kostevc, Crt
  • Damijan, Jože

Abstract

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.

Suggested Citation

  • Kostevc, Crt & Damijan, Jože, 2008. "Causal Link between Exporting and Innovation Activity. Evidence from Slovenian Firms," Papers DYNREG22, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:dynreg22
    Note: DYNREG Research Project – Dynamic Regions in a Knowledge-Driven Global Economy: Lessons and Policy Implications for the European Union
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    References listed on IDEAS

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    1. Ricardo A. Lopez, 2007. "Exports and Productivity – Comparable Evidence for 14 Countries," CAEPR Working Papers 2007-028, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    2. Salvador Barrios & Holger Görg & Eric Strobl, 2003. "Explaining Firms’ Export Behaviour: R&D, Spillovers and the Destination Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 475-496, September.
    3. Sourafel Girma & Holger Görg & Aoife Hanley, 2008. "R&D and Exporting: A Comparison of British and Irish Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(4), pages 750-773, December.
    4. Ebling, Günther & Janz, Norbert, 1999. "Export and innovation activities in the German service sector: empirical evidence at the firm level," ZEW Discussion Papers 99-53, ZEW - Leibniz Centre for European Economic Research.
    5. Robert M. Salomon & J. Myles Shaver, 2005. "Learning by Exporting: New Insights from Examining Firm Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 431-460, June.
    6. Cassiman, Bruno & Golovko, Elena, 2007. "Innovation and the Export-productivity Link," CEPR Discussion Papers 6411, C.E.P.R. Discussion Papers.
    7. The International Study Group on Exports and Productivity, 2007. "Exports and productivity: Comparable evidence for 14 countries," ZEW Discussion Papers 07-069, ZEW - Leibniz Centre for European Economic Research.
    8. Alberto Abadie & Guido W. Imbens, 2008. "On the Failure of the Bootstrap for Matching Estimators," Econometrica, Econometric Society, vol. 76(6), pages 1537-1557, November.
    9. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    10. Sascha Becker & Peter Egger & Sascha O. Becker, 2007. "Endogenous Product versus Process Innovation and a Firm’s Propensity to Export," CESifo Working Paper Series 1906, CESifo.
    11. Roper, Stephen & Love, James H., 2002. "Innovation and export performance: evidence from the UK and German manufacturing plants," Research Policy, Elsevier, vol. 31(7), pages 1087-1102, September.
    12. Ricardo A. Lopez, 2007. "Exports and Productivity – Comparable Evidence for 14 Countries," CAEPR Working Papers 2007-028, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    13. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    14. Jože P. Damijan & Črt Kostevc, 2006. "Learning-by-Exporting: Continuous Productivity Improvements or Capacity Utilization Effects? Evidence from Slovenian Firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(3), pages 599-614, October.
    15. Ricardo A. Lopez, 2007. "Exports and Productivity – Comparable Evidence for 14 Countries," CAEPR Working Papers 2007-028, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    16. 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.
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    Cited by:

    1. Rubini Loris, 2020. "International Trade and Productivity after Apartheid," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-32, June.
    2. Sandra M. Leitner & Robert Stehrer, 2016. "The Role of Financial Constraints for Different Innovation Strategies: Evidence for CESEE and FSU Countries," wiiw Working Papers 125, The Vienna Institute for International Economic Studies, wiiw.
    3. Rubini, Loris, 2009. "Innovation and the Elasticity of Trade Volumes to Tariff Reductions," MPRA Paper 21484, University Library of Munich, Germany.
    4. Fabian Unterlass, 2013. "The relationship between innovation, exports and economic performance. Empirical evidence for 21 EU countries," EcoMod2013 5655, EcoMod.
    5. Rubini, Loris, 2014. "Innovation and the trade elasticity," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 32-46.
    6. Werner Hölzl & Jürgen Janger & Andreas Reinstaller & Isabel Stadler & Fabian Unterlass & Stephanie Daimer & Thomas Stehnken, 2010. "Barriers to Internationalisation and Growth of EU's Innovative Companies. PRO INNO Europe: INNO-Grips II Report," WIFO Studies, WIFO, number 41059, December.

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    More about this item

    Keywords

    DYNREG; firm heterogeneity; innovation; exporting; matching;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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