Importing, Exporting, and Innovation in Developing Countries

Seker, Murat (2009): Importing, Exporting, and Innovation in Developing Countries.

Abstract

Several recent studies have shown that not only exporters but also importers perform better than firms that do not trade. Using a detailed firm level dataset from 43 developing countries, I show that there are persistent differences in evolution of firms when they are grouped according to their trade orientation as: two-way traders (both importing and exporting), only exporters, only importers, and non-traders. Extending the existing models of firm evolution in open economies by incorporating importing decision, I provide a simple model and empirically show that: i) globally engaged firms are larger, more productive, and grow faster than non-traders; ii) two-way traders are the fastest growing and most innovative group who are followed by only-exporters; and iii) estimating export premium without controlling for import status is likely to overestimate the actual value by capturing the import premium. Finally I show the robustness of the findings by providing evidence from the panel data constructed from the original dataset and controlling for variables that are likely to affect firm growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Globally engaged firms, trade in developing countries, R&D and innovation, firm and industry dynamics
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

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