Innovations and Export Performance: Firm-level Evidence from Poland

Abstract

Objective : The main objective of this article is to study the empirical relationship between innovations and export performance of Polish firms. Research Design & Methods : Our analytical framework refers to the most recent strand in the new trade theory literature based on the Melitz (2003) model that stresses the role of firm heterogeneity and the importance of firm productivity in entering export markets. We treat innovations as a key element that can increase the level of productivity and study the significance of both product and process innovations. The empirical implementation of the theoretical framework is based on the probit model and the unique Polish CIS firm-level dataset covering the period 2008-2010. Findings: Our estimation results indicate that the probability of exporting is positively related to product and process innovations, firm size, the share of university graduates in productive employment and foreign capital participation. The results depend also on the level of technology used in the analysed sector and the relative importance of export market. Implications & Recommendations: It is necessary to develop an innovation supporting mechanism that would stimulate both product and process innovations in Poland. Contribution & Value Added: The originality of this work lies in the use of the unique Polish CIS firm level dataset that allows distinguishing between product and process innovations.