Abstract
This paper asks two main research questions. First, what is the relationship between firm-level innovation and export performance? Second, what is the direct effect of innovation on employment, while accounting for the indirect innovation-export link? I use a novel longitudinal administrative dataset of all firms registered to pay tax in South Africa, over 2010–2016. The first main result suggests a positive and significant relationship between innovation and export performance. Second, the fixed effects results show that direct innovation positively impacts employment growth in manufacturing firms, however, R&D-induced exports – the indirect channel – negatively impacts employment growth. This points to the notion that productivity enhancements necessary for South African manufacturing exporters to compete internationally might promote labor-saving innovations. Nonetheless, the overall innovation effect on firm employment growth is positive.
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