Global Demand, Local Ideas: The Impact of Trade Shocks on Firm Innovation

Terhi Maczulskij

No 134, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Abstract This paper examines how firms’ innovation activity responds to product- and destination-specific export demand shocks in their export markets. I draw on unique administrative data for Finnish manufacturing firms from 1999 onwards, matched with national customs records, patent data, and innovation and R&D surveys. The analysis reveals that positive export demand shocks significantly increase patenting activity and the likelihood of introducing new product innovations, while negative shocks reduce patenting and exports. The study finds that these innovation responses are dynamic, with patent applications rising in the short term and granted patents materializing over longer horizons. Heterogeneity analysis shows that more productive and financially stronger firms benefit disproportionately from export demand expansions. This pattern suggests that financial constraints may limit the ability of firms to adopt new innovations even as they expand production.

Keywords: Export demand shock; Firm-level; Innovation; Manufacturing (search for similar items in EconPapers)
JEL-codes: F14 O19 O30 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2025-12-22
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-134.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rif:wpaper:134

Ordering information: This working paper can be ordered from
https://www.etla.fi/ ... -on-firm-innovation/

Access Statistics for this paper

More papers in ETLA Working Papers from The Research Institute of the Finnish Economy Contact information at EDIRC.
Bibliographic data for series maintained by Kaija Hyvönen-Rajecki ().