Self-Selection and Learning-by-Exporting Hypotheses: Micro Level Evidence

This aim of this empirical paper is to investigate the self-selection and learning-by-exporting hypotheses. This study addresses the reverse causality between innovation, productivity and exporting using micro level data on 29 countries from Eurasia and Central and Eastern Europe (CEE). CDM estimation results suggest that innovation and productivity positively influence the firm’s exporting and vice versa. This study has supported the self-selection and learning-by-exporting hypotheses. Previous studies provided mixed outcome on the analysis of these two major hypotheses. Similarly, innovation by exporting is examined using multiple proxies of innovation such as product/process innovation, R&D and organizational innovation. Findings imply that innovation is an important determinant of firms’ exporting and this outcome is robust across Eurasian and CEE firms. Moreover, foreign owned firms are more likely to export and innovate than domestic firms due to their technological superiority over domestic firms. Concerning policy implications, economic policies should address the firm’s innovation, productivity and exporting performance. This would result in better economic integration between Eurasian and CEE firms. By removing the firm’s barriers such as access to finance, trade regulations and taxation etc would encourage trade networks between Eurasian and CEE firms.