Human Capital and Learning from and by Exporting

Abstract

We analyze how knowledge and skills influence the impact of exporting on innovation. Building on the knowledge-based view, we propose separating two effects that previous literature has confounded: a direct effect of exporting on innovation called learning from exporting and an indirect effect of exporting on innovation via employees’ skills called learning by exporting. We first argue that in learning from exporting, exporting has an inverse U-shaped relationship with innovation. This reflects the ease of incorporating explicit foreign knowledge in innovations at low levels of exporting, and the difficulty in incorporating tacit foreign knowledge at high levels of exporting once explicit knowledge has been incorporated. We then propose that in learning by exporting, employee skills modify the effect of exporting and innovation resulting in a U-shaped relationship with innovations. At low levels of exporting, employees suffer from the not-invented-here syndrome, a local mindset that favors internal over external knowledge and rejects foreign knowledge. However, at high levels of exporting, employees are more likely to develop a more global mindset and accept foreign knowledge as they shift their focus from the domestic to the foreign markets, supporting innovation.