International activities and innovation: Evidence from Italy with a special regressor approach

Stefano Iandolo and Anna Ferragina

The World Economy, 2021, vol. 44, issue 11, 3300-3325

Abstract: By using panel data on Italian manufacturing firms, this paper contributes to the literature on the nexus between firms’ internationalisation and innovation performance, taking into account the impact of different internationalisation strategies (with a focus on exports, foreign direct investments and outsourcing) on firms’ product and process innovation. Being robust to the implementation of different and complementary methodologies (impact evaluation analysis, multivariate probit and a special regressor approach to instrumental variables), our results suggest that accessing foreign markets through the different strategies considered may ensure different returns in terms of both types of innovation. We find evidence in support of the learning‐by‐exporting literature since exporting shows positive effects on the probability of carrying out both product and process innovation. Moreover, while investing abroad enhances product innovation, suggesting a more market‐seeking oriented strategy (i.e. rather than resource‐seeking), on the contrary, outsourcing raises the probability of introducing process innovation. Our results may prompt further reflections on public policies and on incentives for supporting domestic firms’ internationalisation.

Date: 2021
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