Are Exporters More Likely to Introduce Product Innovations?

Abstract

A firm’s export status may improve its capacity of introducing product innovations. We explore this idea using very rich firm-level data on Italian Manufacturing, and sector-province specific measures of firms’ distance from export markets and of their export market potential as instruments for differences in export activities. We find that exporting significantly increases the likelihood of introducing product innovations and that this effect is not fully captured by the channels commonly stressed by the theoretical literature, such as larger market (and accordingly firm) size or higher investments in R&D. We argue that heterogeneity in foreign customers’ tastes and needs may explain our findings.

Keywords: Exporters, Firms, Italy, Manufacturing, Product Innovation

JEL Classification: F1, L2, O3