Does Innovation Cause Exports? Evidence from Exogenous Innovation Impulses and Obstacles Using German Micro Data

By Stefan Lachenmaier, Ludger Woessmann. Social Science Research Network, 2006

378 citations recorded by the source corpus.

Trade and growth theories predict a mutual causation of innovation and exports. We test empirically whether innovation causes exports using a uniquely rich German micro dataset. To overcome the potential endogeneity, we need to identify variations in innovations that are exogenous to export performance. Our identification strategy takes advantage of a unique micro dataset of an innovation survey of German manufacturing firms. In this survey, the firms do not only report about their innovation behavior, their export share and other relevant control variables, but also whether specific impulses furthered their innovation and whether specific obstacles hindered their innovation. By using certain innovation impulses and obstacles that are credibly exogenous to the firmsâ€™ export performance as instruments for the actual innovative activity, we can identify variations in innovations that are exogenous to exports. We argue that this instrumental variable strategy yields estimates of the causal effect of innovation on exports in an industrialized country. In this paper we use as reference models a simple OLS framework and also a Tobit model to account for the relatively high share of non-exporters. Both models are then compared with their instrumental variable counterparts, a linear two-stage least square model and an IV Tobit model. We find that innovation attributable to this variation leads to an increase of about 10 percentage points in the export share of German manufacturing firms. The evidence is robust to several alternative specifications and similar for product and process innovations.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/1620981e19f986862bb32e48f5559c5e2a039351

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Citations in the corpus

Exporting and innovation performance: Analysis of the annual Small Business Survey in the UK (2011, methodology): “…behaviour and innovation, much of this employs data from either bespoke surveys designed for the purpose, or the Community Innovation Survey (CIS), see for example Lefebvre and Lefebvre (2001), Roper and Love (2002), or most recently Lachenmaier and Wößmann (2006) and Roper et al. (2006)2.”
R&D, product innovation, and exporting: evidence from UK new technology based firms (2011, methodology): “…find a positive link between innovation and exporting in a variety of countries including the UK, Canada, Italy, Ireland and Germany (Wakelin, 1998; Lefebvre and Lefebvre, 2001; Sterlacchini, 1999; Bleaney and Wakelin, 2002; Roper and Love, 2002; Lachenmaier and Wößmann, 2006; Roper et al, 2006).”
Exporting, R&D, and absorptive capacity in UK establishments (2008, background): “Similar simultaneous approaches have been employed in several empirical studies treating innovation and exports as inextricably interdependent (Hughes, 1986; Zhao and Li, 1997; Smith et. al., 2002; and Lachenmaier and Woessmann, 2006).”
Experience, age and exporting performance in UK SMEs (2016, background): “…non-exporters, and generally find a positive link between innovation and exporting in a variety of contexts (Bleaney & Wakelin, 2002; Cassiman & Golovko, 2011; D’Angelo et al., 2013; Harris & Li, 2009; Lachenmaier & Wößmann, 2006; Lefebvre & Lefebvre, 2001; Roper & Love, 2002; Sterlacchini, 1999).”