The Impact of Exports on Innovation: Theory and Evidence

58 Pages Posted: 8 May 2018

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Antonin Bergeaud

Banque de France

Matthieu Lequien

National Institute of Statistics and Economic Studies (INSEE)

Marc J. Melitz

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2018

Abstract

This paper investigates the effect of export shocks on innovation. On the one hand a positive shock increases market size and therefore innovation incentives for all firms. On the other hand it increases competition as more firms enter the export market. This in turn reduces profits and therefore innovation incentives particularly for firms with low productivity. Overall the positive impact of the export shock on innovation is magnified for high productivity firms, whereas it may negatively affect innovation in low productivity firms. We test this prediction with patent, customs and production data covering all French manufacturing firms. To address potential endogeneity issues, we construct firm-level export proxies which respond to aggregate conditions in a firm's export destinations but are exogenous to firm-level decisions. We show that patenting robustly increases more with export demand for initially more productive firms. This effect is reversed forthe least productive firms as the negative competition effect dominates.

Keywords: Innovation, trade, export, demand shocks, patents

JEL Classification: D21, F13, F14, F41, O30, O47

Suggested Citation

Aghion, Philippe and Bergeaud, Antonin and Lequien, Matthieu and Melitz, Marc J., The Impact of Exports on Innovation: Theory and Evidence (April 2018). Banque de France Working Paper No. 678. Available at SSRN: https://ssrn.com/abstract=3171084 or http://dx.doi.org/10.2139/ssrn.3171084

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Antonin Bergeaud (Contact Author)

Banque de France ( email )

Paris
France

Matthieu Lequien

National Institute of Statistics and Economic Studies (INSEE) ( email )

18, Boulevard Adolphe-Pinard
92244 Malakoff Cedex
France

Marc J. Melitz

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8297 (Phone)
617-417-6536 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
31
Abstract Views
235
PlumX Metrics