Endogenous Innovation and Export Performance in Firms
We investigated whether export activity is correlated with innovation in a large sample of European companies. We explicitly considered five types of innovation: a) process innovation; b) product innovation; c) process and product innovation; d) product innovation new to the firm; and e) product innovation new to the market. We considered innovation as endogenous and determined by R&D through a process characterized by the regional technological environment. Our analysis enabled us to propose an integrated model incorporating R&D, innovation, and export in a scheme of simultaneous decisions which considers their mutual correlations.
Econometric results showed that product and process innovation positively affect the export intensity of manufacturing firms in Europe. The results also indicated complementarity effects between process and product innovation. The average effect on export intensity from engaging in process innovation is larger than that found for product innovation, except in cases where the product is new to the market. When both types of innovation have been carried out, a larger effect results than that observed for product or process innovation alone. Furthermore, the average marginal effect on export intensity from innovation of any kind is highly positive and significant.
Carboni, O.A. and Medda, G. (2024). Endogenous Innovation and Export Performance in Firms. Journal of Applied Economic Sciences, Volume XIX, Spring, Issue 1(83), 48 – 62. https://doi.org/10.57017/jaes.v19.1(83).03
[1] Aghion, P., Bergeaud, A., Lequien, M., & Melitz, M. J. (2018). The impact of exports on innovation: Theory and evidence. NBER working paper No. w24600. Nber Inc.
[2] Altomonte, C., Aquilante, T., Békés, G., & Ottaviano, G. (2013). Internationalization and innovation of firms: Evidence and policy. Economic Policy, 28(76), 663–700. https://www.jstor.org/stable/24029521
[3] Altomonte, C., Gamba, S., Mancusi, M. L., & Vezzulli, A. (2016). R&D investments, financing constraints, exporting and productivity. Economics of Innovation and New Technology, 25, 283-303. https://doi.org/10.1080/10438599.2015.1076203
[4] Angrist, J. D., & Krueger, A. B. (2001). Instrumental variables and the search for identification: from supply and demand to natural experiments. Journal of Economic Perspectives, 15, 69–85. https://doi.org/10.1257/jep.15.4.69
[5] Atzeni, G. E., & Carboni, O. A. (2004). ICT Productivity and Human Capital: The Italian North-South Duality. RISEC, International Review of Economics and Business, 51, 265–284.
[6] Atzeni, G. E., & Carboni, O. A. (2006). The effects of subsidies on investment: An empirical evaluation on ICT in Italy. Revue de l’OFCE, 5(97 bis), 279-302. https://doi.org/10.3917/reof.073.0279
[7] Audretsch, D., & Belitski, M. (2020). The role of R&D and knowledge spillovers in innovation and productivity. European Economic Review, 123, 103391. https://doi.org/10.1016/j.euroecorev.2020.103391
[8] Aw, B. Y., Roberts, M. J., & Xu, D. Y. (2008). R&D investments, exporting, and the evolution of firm productivity. American Economic Review, 98(2), 451-56. https://doi.org/10.1257/aer.98.2.451
[9] Aw, B. Y., Roberts, M. J., & Xu, D.Y. (2011). R&D Investments, Exporting, and Productivity Dynamics. American Economic Review, 101(4), 1312–1344. https://doi.org/10.1257/aer.101.4.1312
[10] Ayllón, S., & Radicic, D. (2019). Product innovation, process innovation and export propensity: persistence, complementarities and feedback effects in Spanish firms. Applied Economics, 51, 3650-3664. https://doi https://doi.org/10.1080/00036846.2019.1584376
[11] Becker, S., & Egger, P. (2013). Endogenous product versus process innovation and a firm’s propensity to export. Empirical Economics, 44, 1–26. https://doi.org/10.1007/s00181-009-0322-6
[12] Bengoa, M., Román, V.M., & Pérez, P. (2017). Do R&D activities matter for productivity? A regional spatial approach assessing the role of human and social capital. Economic Modelling, 60, 448–461. https://doi.org/10.1016/j.econmod.2016.09.005
[13] Berchicci, L. (2013). Towards an open R&D system: Internal R&D investment, external knowledge acquisition and innovative performance. Research Policy, 42(1), 117-127. https://doi.org/10.1016/j.respol.2012.04.017
[14] Bıçakcıoğlu-Peynirci, N., Hizarci-Payne, A. K., Özgen, Ö., & Madran, C. (2019). Innovation and export performance: a meta-analytic review and theoretical integration. European Journal of Innovation Management, 23, 789-812. https://doi.org/10.1108/EJIM-06-2019-0149
[15] Carboni, O., and Russu, P. (2017). Complementarity in product, process, and organizational innovation decisions: Evidence from European firms. R&D Management, 48(2), 210-222. https://doi.org/10.1111/radm.12284
[16] Carboni, O. A., & Medda, G. (2021.a.) Innovative activities and investment decision: evidence from European firms. Journal of Technology Transfer, 46, 172–196. https://doi.org/10.1007/s10961-019-09765-6.
[17] Carboni, O. A., and Medda, G. (2021.b.) External R&D and product innovation: Is over-outsourcing an issue? Economic Modelling, 103, https://doi.org/10.1016/j.econmod.2021.105601
[18] Cassiman, B., Golovko, E., and Martínez-Ros, E. (2010). Innovation, exports and productivity. International Journal of Industrial Organization, 28, 372–376. https://doi.org/10.1016/j.ijindorg.2010.03.005
[19] Cassiman, B., & Golovko, E. (2011). Innovation and Internationalization Through Exports. Journal of International Business Studies, 42 (1): 56–75. https://doi.org/10.1057/jibs.2010.36
[20] Chan, L. K., Lakonishok, J., and Sougiannis, T. (2001). The stock market valuation of research and development expenditures. The Journal of Finance, 56(6), 2431-2456. https://doi.org/10.1111/0022-1082.00411
[21] Chen, T., Chen, X., Wanga, C., and Xiang, X. (2018). Export behaviour and firm innovation: New method and evidence. Economics Letters, 170, 76–78. https://doi.org/10.1016/j.econlet.2018.05.029
[22] Coad, A. (2018). Firm age: a survey. Journal of Evolutionary Economics, 28, 13-43. https://doi.org/10.1007/s00191-016-0486-0
[23] Coad, A. (2019). Persistent heterogeneity of R&D intensities within sectors: evidence and policy implications. Research Policy, 48, 37–50. https://doi.org/10.1016/j.respol.2018.07.018
[24] Conte, A., and Vivarelli, M. (2014). Succeeding in innovation: key insights on the role of R&D and technological acquisition drawn from company data. Empirical Economics, 47(4), 1317-1340. https://doi.org/10.1007/s00181-013-0779-1
[25] Crépon, B., Duguet, E., and Mairesse, J. (1998). Research, innovation and productivity: an econometric analysis at the firm level. Economic of Innovation and New Technology, 7, 115–158. https://doi.org/10.1080/10438599800000031
[26] Damijan, J. P., Kostevc, Č., & Polanec, S. (2010). From Innovation to Exporting or Vice Versa? The World Economy, 33 (3), 374-398. https://doi.org/10.1111/j.1467-9701.2010.01260.x
[27] Dohse, D., and Niebuhr, A. (2018). How different kinds of innovation affect exporting, Economics Letters, 163, 182–185. https://doi.org/10.1016/j.econlet.2017.12.017
[28] European Commission. (2013). Trade, growth and jobs. Contribution from the Commission to the February 2013 European Council Debate on Trade, Growth and Jobs, 1–20. http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_151052.pdf
[29] Ganotakis, P., & Love, J. H. (2011). R&D, product innovation, and exporting: evidence from UK new technology-based firms. Oxford Economic Papers, 63, 279–306. https://doi.org/10.1093/oep/gpq027
[30] García-Vega, M., & Vicente-Chirivella, Ó., 2020. Do university technology transfers increase firms' innovation? European Economic Review, 123, 103388. https://doi.org/10.1016/j.euroecorev.2020.103388
[31] Griliches, Z. (1979). Issues in Assessing the Contribution of Research and Development to Productivity Growth. Bell Journal of Economics, 10(1): 92–116. https://doi.org/10.2307/3003321
[32] Guisado-González, M., Wright, L., & Guisado-Tato, M. (2017). Product–process matrix and complementarity approach. The Journal of Technology Transfer, 42(3), 441–459. https://doi.org/10.1007/s10961-015-9435-6
[33] Guzzini, E., and Iacobucci, D. (2014). Business group affiliation and R&D. Industry and Innovation, 21, 20–42. https://doi.org/10.1080/13662716.2014.879253
[34] Hagedoorn, J., & Cloodt, M. (2003). Measuring innovative performance: is there an advantage in using multiple indicators? Research Policy, 32 (8), 1365-1379. https://doi.org/10.1016/S0048-7333(02)00137-3
[35] Hall, B.H., Moncada-Paternó-Castello, P., Montresor, S., & Vezzani, A. (2016). Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe. Economics of Innovation and New Technology, 25, 183–196. https://doi.org/10.1080/10438599.2015.1076194
[36] Harris, R., & Li, Q. C. (2009). Exporting, R&D, and absorptive capacity in UK establishments. Oxford Economic Papers, 61(1), 74–103. https://hdl.handle.net/10.1093/oep/gpn011
[37] Harris, R., & Li, Q. C. (2011). Participation in export markets and the role of R&D: establishment-level evidence from the UK Community Innovation Survey 2005. Applied Economics, 43(23), 3007-3020. https://doi.org/10.1080/00036840903427190.
[38] Holl, A., Peters, B., & Rammer, C. (2022). Local knowledge spillovers and innovation persistence of firms. Economics of Innovation and New Technology, on line first. https://doi.org/10.1080/10438599.2022.2036609
[39] Hullova, D., Trott, P., & Simms, C. D. (2016). Uncovering the reciprocal complementarity between product and process innovation. Research Policy, 45(5), 929-940. https://doi.org/10.1016/j.respol.2016.01.012
[40] İpek, İ. (2019). Organizational Learning in Exporting: A Bibliometric Analysis and Critical Review of the Empirical Research. International Business Review, 28(3): 544–559. https://doi.org/10.1016/j.ibusrev.2018.11.010
[41] Jaffe, A. B. (1986). Technological opportunity and spillovers of R&D: evidence from firms' patents, profits, and market Value. American Economic Review, 76, 984 - 1001. https://www.jstor.org/stable/1816464
[42] Ketokivi, M., & McIntosh, C. N. (2017). Addressing the endogeneity dilemma in operations management research: theoretical, empirical, and pragmatic considerations. Journal of Operation Management, 52, 1–14. https://doi.org/10.1016/j.jom.2017.05.001
[43] Kou, M., Yang, Y., & Chen, K. (2020). The impact of external R&D financing on innovation process from a supply-demand perspective. Economic Modelling, 92, 375–387. https://doi.org/10.1016/j.econmod.2020.01.016
[44] López-Bazo, E., & Motellón, E. (2018). Innovation, heterogeneous firms and the region: evidence from Spain. Regional Studies, 52(5), 673-687. https://doi.org/10.1080/00343404.2017.1331296
[45] Lychagin, S., Pinkse, J., Slade, M. E., & Van Reenen, J. (2016). Spillovers in space: does geography matter? Journal of Industrial Economics, 64, 295–335. https://doi.org/10.1111/joie.12103
[46] Mancusi, M. L., Vezzulli, A., Fazzoni, S., Rotondi, Z., & Sobrero, M. (2018). Export and Innovation in Small and Medium Enterprises: The Role of Concentrated Bank Borrowing. Economica, 85(337), 177-204. https://doi.org/10.1111/ecca.12252
[47] Medda, G. (2020). External R&D, product and process innovation in European manufacturing companies. Journal of Technology Transfer, 45, 339–336. https://doi.org/10.1007/s10961-018-9682-4
[48] Nemlioglu, I., & Mallick, S. (2020). Do innovation-intensive firms mitigate their valuation uncertainty during bad times? Journal of Economic Behavior and Organization, 177, 913–940. https://doi.org/10.1016/j.jebo.2020.06.004.
[49] OECD. (2015). STAN R&D: Research and Development Expenditure in Industry - ISIC Rev. 4. 2015 ed. STAN: OECD Structural Analysis Statistics (database).
[50] Papke, L. E., & Wooldridge, J. M. (1996). Econometric methods for fractional response variables with an application to 401(k) plan participation rates. Journal of Applied Economics, 11, 619–632. https://doi.org/10.1002/(SICI)10991255(199611)11:6<619::AIDJAE418>3.0.CO;2-1
[51] Ramalho, E. A., Ramalho J.S., & Murteira, M. R. (2011). Alternative estimating and testing empirical strategies for fractional regression models. Journal of Economic Surveys, 25(1), 19-68. https://doi.org/10.1111/j.1467-6419.2009.00602.x
[52] Raymond, W., Mohnen, P., Palm, F. & van der Loeff, S. S. (2010). Persistence of Innovation in Dutch Manufacturing: Is it Spurious? Review of Economics and Statistics, 92: 495–504. https://doi.org/10.2307/27867554
[53] Rodríguez-Gulías, M. J., Rodeiro-Pazos, D., & Fernández-López, S. (2020). The effect of regional resources on innovation: a firm-centered approach. Journal of Technology Transfer, 46, 760–791. https://doi.org/10.1007/s10961-020-09811-8
[54] Roodman, D. (2011). Fitting fully observed recursive mixed-process models with cmp. Stata Journal, 11, 159–206. https://doi.org/10.1177/1536867X1101100202
[55] Roper, S., Love, J. H., and Bonner, K. (2017). Firms’ knowledge search and local knowledge externalities in innovation performance. Research Policy, 46, 43-56. https://dx.doi.org/10.1016/j.respol.2016.10.004
[56] Tavassoli, S. (2018). The Role of Product Innovation on Export Behaviour of Firms: Is It Innovation Input or Innovation Output That Matters? European Journal of Innovation Management, 21, 294–314. https://doi.org/10.1108/EJIM-12-2016-0124https://doi.org/10.1108/EJIM-12-2016-0124
[57] Un, C. A., Cuervo-Cazurra, A., and Asakawa, K. (2010). R&D Collaborations and Product Innovation. Journal of Product Innovation Management, 27(5), 673–689. https://doi.org/10.1111/j.1540-5885.2010.00744.x
[58] Un, C. A., & Asakawa, K. (2015). Types of R&D collaborations and process innovation: The benefit of collaborating upstream in the knowledge chain. Journal of Product Innovation Management, 32(1), 138-153. https://doi.org/10.1111/jpim.12229.
[59] Van Beveren, I., & Vandenbussche, H. (2010). Product and process innovation and firms' decision to export. Journal of Economic Policy Reform, 13(1), 3-24. https://doi.org/10.1080/17487870903546267
[60] Wooldridge, J. M. (2010). Econometric Analysis of Cross Section and Panel Data. MIT Press Books, The MIT Press, 2nd Edition.
[61] Wu, L., Wei, Y., & Wang, C. (2021). Disentangling the effects of business groups in the innovation-export relationship. Research Policy, 50, 104093. https://doi.org/10.1016/j.respol.2020.104093
[62] Wulff, J.N., & Villadsen, A.R. (2020). Keeping it within bounds: Regression analysis of proportions in international business. Journal of International Business Studies, 51, 244-262. https://doi.org/10.1057/s41267-019-00278-w
[63] Zhang, J., & Zhu, M. (2016). Market Orientation, Product Innovation and Export Performance: Evidence from Chinese Manufacturers. Journal of Strategic Marketing, 24(5): 377–397. https://doi.org/10.1080/0965254X.2015.1052538