The Heterogeneous Impact of Market Size on Innovation: Evidence from French Firm-Level Exports

By Philippe Aghion, Antonin Bergeaud, M. Lequien, Marc J. Melitz. Review of Economics and Statistics, 2022

173 citations recorded by the source corpus.

Abstract We analyze how demand conditions faced by a firm in its export markets affect its innovation decisions. We exploit exogenous firm-level export demand shocks and find that firms respond by patenting more; furthermore, this response is driven by the subset of initially more productive firms. The patent response arises two to five years after the shock, highlighting the time required to innovate. In contrast, the demand shock raises contemporaneous sales and employment for all firms regardless of their productivity. This skewed innovation response to common demand shocks arises naturally from a model of endogenous innovation and competition with firm heterogeneity.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/c3febff23fa57c9ce5b0e618953258c446525744

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Eduardo Morales
2. Michael J. Kolesar
3. Rodrigo Adão
4. P. Restrepo
5. Daron Acemoglu

In Strategy and Management

1. Eduardo Morales
2. Rodrigo Adão

Citations in the corpus

• Shift-Share Designs: Theory and Inference* (2018, background): “Furthermore, recent papers have explored versions of shift-share strategies to estimate the effect on firms of shocks to outsourcing costs and foreign demand (Hummels et al., 2014; Aghion et al., 2018).”