Technological Innovation and Exports: Unpacking Their Reciprocal Causality

The authors aim to advance extant understanding of the dynamics of firms operating abroad by considering the effects of innovation (research-and-development intensity, product and process innovations) on exports (breadth and depth), and vice versa. The study analyzes a panel data set of 696 Spanish manufacturing firms during 1994-2005 using Tobit and logit regressions and the Granger test of causality to offer a more complete picture of this complex relationship. They find broad support for the notion that innovation and exports have a reciprocal causal relationship, although the findings are partly nuanced by positive but nonsignificant associations between product innovation and exports and between export depth and process innovation. Furthermore, both export and innovation processes Granger-cause each other, demonstrating that there is a double causal relationship.