Exporting and Innovation: Theory and Firm-Level Evidence from the People's Republic of China

Faqin Lin and Hsiao Chink Tang ()
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Hsiao Chink Tang: Asian Development Bank, Postal: 6 ADB Avenue, 1550 Metro Manila, Philippines, http://www.adb.org

No 111, Working Papers on Regional Economic Integration from Asian Development Bank

Abstract: This paper investigates how exporting affects firm innovation. We embed innovation into a firm heterogeneity model with productivity, where in equilibrium the model shows that exporters invest more in innovation, such as research and development (R&D), than non-exporters. Using firm-level data from the People’s Republic of China (PRC), we apply the Levinsohn and Petrin (2003) method of estimating firm productivity and matching econometrics to control for endogeneity. The results show, on average, in contrast to non-exporters, exporters increase their R&D intensity by more than 5%, raise their R&D expenditure by more than 33%, and are 4% more likely to engage in R&D activity. In addition, we find exporting to have a smaller impact on innovation among firms that export processed goods, specifically, those in the electronics sectors, located in coastal provinces, and foreign-owned.

Keywords: Exporting; innovation; firm heterogeneity; matching (search for similar items in EconPapers)
JEL-codes: D21 F14 O31 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013-04-01
New Economics Papers: this item is included in nep-cna, nep-cse, nep-dev, nep-eff, nep-ino, nep-int, nep-knm and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbrei:0111

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