Export behaviour of Italian manufacturing firms over the nineties: the role of innovation

Abstract

This paper analyses the relationship between innovation and export behaviour of Italian manufacturing firms in different exchange rate regimes. The paper is based on a sample including firms which have carried out an innovative activity through R&D investments and/or investments in new plants or equipment. Export behaviour is defined in a dual way: as a probability for a firm to export and as the propensity to export for the exporting firms. An empirical model of the determinants of export behaviour is estimated using the Cragg’s specification of the Tobit model. The results suggest that innovation capabilities are very important competitive factors and help explain heterogeneity in export behaviour among Italian firms. However, the exchange rate devaluation reduces the importance of technological competitiveness in affecting exports because it allows also non-innovating firms to enter foreign markets. Moreover, once new firms have entered the market, they continue to be exporters also when the exchange rate returns to its previous level (hysteresis). The export intensity of innovating firms is systematically higher than that of non-innovating firms. The paper provides also specific evidence on export behaviour of firms localised in the south of the country (Mezzogiorno).