Imported intermediates, technological capabilities and exports: Evidence from Brazilian firm-level data

Abstract

This paper explores how internal technological capabilities influence the relationship between imported inputs and the export performance of firms. We apply threshold regression techniques to a representative dataset of Brazilian firms and find a strong positive influence of innovation skills on the relationship between imported intermediates and export revenues. Complementarities between capabilities and importing are found only for high-quality imports and are stronger for exports of products with a higher scope for quality differentiation. We also observe that technological capabilities are directly correlated with export performance, confirming the view that innovation positively influences firms’ international competitiveness. However, this relationship is not found to be significant for firms that export products with a low scope for quality differentiation. Overall, our results suggest that technological capabilities and the quality of imported inputs not only benefit firms directly but also complement each other in enhancing export competitiveness.