Causal Link between Exporting and Innovation Activity. Evidence from Slovenian Firms

In this paper we investigate the causal relationship between firm's innovation and exporting activity by using detailed firm-level data on innovation activity, financial variables and information on trade for Slovenian firms in 1996-2002. We employ the bivariate probit regression on a system of innovation and exporting equations as well as matching procedures to tease out the direction of causality between exporting status and innovation activity. Our results suggest a strong positive relationship between exporting and innovation activity in both directions, while results on the impacts of lagged export (or innovation) status on the probability to start innovating (or exporting) are less conclusive. In other words, whereby innovating status increases the probability of exporting it does not increase the probability of becoming a first time exporter, and vice versa. The results remain unaltered also after allowing for discrimination between product and process innovation.DYNREG, firm heterogeneity, innovation, exporting, matching

Firms' pattern of trade and access to finance.

This paper summarizes recent advances in the empirical research on firms' learning from trade participation and the role of finance in both starting to trade, surviving in export markets as well as expanding along the intensive and extensive trade margins. It highlights the increased importance of imports, which impacts at firms' performance primarily through relaxed technological constraints by increasing firms's scope of inputs and by lowering their input price index. In addition, imports are shown to boost firms' innovation and introduction of new products, which facilitates firms' decisions to start exporting. Another important aspect that has been highlighted is the essential role of finance in furthering firms'survival and expansion in export markets.exports,learning-by-exports,export expansion, financial constraints, credit crunch;

Knowledge Transfer, Innovation and Growth

Recent empirical work has examined the extent to which national and international spillovers affect the functioning of a firm. Foreign direct investment and trade have been shown to serve as channels for the mediation of knowledge spillovers. The aim of this paper is to analyse whether, and to what extent, firm ability to innovate is induced by firm’s own R&D activity and what is the effect of factors external to firm. We first estimate the impact of firms' internal R&D capital and external R&D spillovers on innovation activity within an integrated dynamic model. In the second step, we proceed to estimate the impact of firms' innovations on productivity growth. Using firm-level innovation and accounting data for a large sample of Slovenian firms from 1996-2002, the paper produces some interesting findings. First, firm R&D expenditures as well as external knowledge spillovers, such as national and international public R&D subsidies, foreign ownership and intra-sector innovation spillovers foster the ability of firms to innovate. Second, innovations resulting from firm’s R&D may contribute substantially to its total factor productivity growth. Here, foreign ownership is shown to have a dual impact on firm’s TFP growth - while it enhances firm ability to innovate it also contributes to TFP growth via superior organization techniques and other channels of knowledge diffusion. These results, however, are not robust to different econometric techniques. By using matching techniques and firm propensity to innovate in order to match innovating firms with otherwise similar non-innovating firms we find no support for the importance of innovation on productivity growth.DYNREG, innovation, external knowledge spillovers, FDI, trade

Exports and Productivity: Comparable Evidence for 14 Countries

We use comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. Our overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. We document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of our results we find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.exports; productivity; micro data; international comparison

The Role of Financial Constraints on Foreign Markets

Recent research on the role of foreign activities and their impact on firm characteristics has, with few exceptions, confirmed the existence of persistently large differences between exporters and non-exporters in terms of size, investments, innovative activity etc. In spite of the mounting evidence on the advantages of exporters over firms focused solely on their domestic markets, the source of these differences is yet to be explained. The present contribution attempts to analyze the role of financial constraints as one of the factors determining which firms will export and which will not. Through a survey of the existing literature, the role of financial constraints that limit foreign market access to only a subset of the firms, will be revealed. It is shown that financial constraints – even when other factors are explicitly considered (such as firm size, productivity, capital intensity, . . .) – to a large extent determine the firms that will be able to enter into foreign markets, and also mean that financially constrained firms end up exporting less frequently and in smaller quantities than could otherwise be expected.firm heterogenity, exports, productivity, financial constraints

Does a foreign subsidiary's network status affect its innovation activity? Evidence from post-socialist economies

A detailed questionnaire survey among 809 foreign subsidiaries in five post-socialist economies (East Germany, Poland, Romania, Slovenia and Croatia) is used to study determinants of innovation activity of foreign subsidiaries. Survey data comprise traditional firm innovation activity determinants and indicators of a foreign subsidiary status. Our findings demonstrate that foreign subsidiaries are relatively independent as far as innovation activity is concerned, while at the same time subsidiaries with better access to foreign parent companies R&D results are more likely to innovate. Important differences, however, are found in factors that determine product and process innovation: (i) subsidiaries that invest more in R&D exhibit higher probability for product but not for process innovation; (ii) acquisition of external knowledge and company size have significant and positive impact on on process innovation only, (iii) transfer of responsibilities from headquarters to subsidiaries and foreign investor being a MNE is conducive to process innovation; (iv) marketseeking motivation of foreign investors has a negative impact on product innovation status; (v) higher age of subsidiary is positive for its process innovation, i.e. a foreign investor needs some time to initiate innovation activities in a subsidiary

Trade liberalisation and economic geography in CEE countries: the role of FDI in the adjustment pattern of regional wages

This article studies the within-country regional effects of trade liberalisation in Central and Eastern European countries. CEE countries liberalised their trade with the European Union from the mid-1990s, while also receiving substantial foreign investment in the process. The first part of the period witnessed strong agglomeration effects in all of the countries, leading progressively to core–periphery type specialisation, and increasing regional wage differentials. In the second part of the period, however, there is notable evidence of a reversal in the relative regional specialisation, pointing to a U-shaped pattern of relative regional wages. Using the regional data for five CEE countries in 1990–2004 we argue that FDI inflows can be an important factor accelerating the observed regional adjustment process in the host country. First, we show that in four out of five CEE countries there is a significant U-shaped adjustment pattern of regional wages after they opened up to foreign trade. Second, we find robust econometric confirmation that in three of the five countries FDI has contributed significantly to faster adjustment of relative regional wages.

Not Every Kind of Outward FDI Increases Parent Firm Performance: The Case of New EU Member States.”

Using a large firm-level dataset we investigate what kind of firms from new EU member states from Central and Eastern Europe (CEECs) tend to invest abroad (testing of self-selection hypothesis), and what is the impact of outward FDI on their productivity (testing of learning-by-investing hypothesis). We find that the best firms tend to self-select into outward FDI. There is also a positive effect of outward FDI on productivity growth of investing firms from CEECs, the strongest being in the case of Estonia, Romania, Czech Republic, and Slovakia. The positive impact of becoming a first-time foreign investor is relatively long lasting, but comes into effect only in investments in Western European or other CEECs and in the case of manufacturing subsidiaries.peerreview_statement: The publishing and review policy for this title is described in its Aims & Scope. aims_and_scope_url: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=mree20status: publishe