Innovation activity and exports by destination

Tian Wang and Cangfeng Wang

Applied Economics, 2023, vol. 55, issue 31, 3623-3636

Abstract: This article examines the effect of innovation activity on exports by destination using firm-level data from two India surveys collected by the World Bank. Both OLS regressions and IV estimations using innovation-reason indicators as the exogenous variation in innovation activity show the following findings. Firms with spending on R&D activity increase exports to richer destinations and consequently increase total exports than those without. This suggests that firms in lower-middle-income countries like India need to engage in R&D activity to satisfy the quality requirement in richer countries and increase exports. However, there is no consistent evidence that firms with a new process/product have such a causal effect. The contrast may reflect that, in poorer countries like India, instead of introducing new processes/products, spending on formal R&D activity is one more appropriate measure of innovation activity for the international market.https://datahelpdesk.worldbank.org/knowledgebase/articles/906519

Date: 2023
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DOI: 10.1080/00036846.2022.2117775

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