Abstract
Abstract This paper presents an analysis of the crucial relationship between innovation, productivity, and export in Small and Medium Enterprises (SMEs). The primary aims of this study are to evaluate the role of innovation in the premium export and test the hypothesis of firm conscious self-selection on willingness to export. To this end, the authors used their database of SMEs, obtained from the survey conducted in the IDEIS project, which provides highly pertinent information on innovation and export areas. Based on the aforementioned database, the authors evaluate apparent premium of exportation and innovation. In addition, they demonstrate the effectiveness of the export premium for high exportation firms that implement process and organization innovations. Finally, the authors analyse the effect of conscious self-selection from the export process that transforms an intention to export into the capacity to export in short term. The conscious self-selection to export is revealed by simultaneously endogeneizing productivity and innovation output based on recursive non-linear model.
Highlights
It is well established that ex ante higher productivity level is directly linked to a firm’s decision to export
The remainder of this paper proceeds as follows: in Section 2, we examine the empirical scholarship that pertains to the relationship between innovation, productivity, and export; Section 3 summarizes the data and variables; in Section 4, we deal with the estimation of innovation and export premiums; Section 5 is devoted to test conscious self-selection effect; and Section 6 concludes our paper with a sketch of research perspectives
In light of original data relative to SMEs in Normandy (France), two important points regarding the relationship between innovation, productivity, and export have been brought to bear: 1) The productive advantage of exporting firms is largely explained by their innovation activities
Summary
It is well established that ex ante higher productivity level is directly linked to a firm’s decision to export This phenomenon, called ‘self-selection effect’, introduced by Bernard and Jensen (1999) and described empirically in a significant number of works, is generated by the presence of irreversible fixed costs associated with export (market research, recruitment of specialists in export, and consulting). Theoretical works on firm dynamics (Jovanovic, 1982; Hopenhayn, 1992) as well as their application to our understanding of international trade (Bernard et al, 2003; Melitz, 2003) do not explain the origin of firm heterogeneity Such studies assume that productivity varies between firms as a result of random technological shocks. They show that the anticipation of trade liberalization tends to motivate the decision to innovate and to export market entry
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