The dynamics of exports and R&D in SMEs

A growing body of literature is exploring firm export and R&D activities. However, most studies examine the first one, whilst considering the second as an explanatory variable or vice versa. This paper contributes to this literature by exploring the joint dynamics of exports and R&D using data from a representative sample of small and medium-sized enterprises in Spanish manufacturing over the 1990-2006 period. The results confirm the existence of a strong interdependence between export and R&D activities. Indeed, engaging in export (R&D) activities will increase a firm's chances of also engaging in R&D (export) activities. This, in turn, increases firms' chances of succeeding in export (R&D) activities. Additionally, once we control for firm heterogeneity, strong persistence still remains in each activity due to true state dependence. The results are robust in the use of alternative measures of internationalization (i.e. imports) and innovative activities (product and process innovation).