Does persistence in internationalization and innovation influence firms’ performance?

Abstract

Purpose The purpose of this paper is to analyze the joint effect of persistency in innovation and export on firms’ total factor productivity. In particular, the aim is to determine if exporting in international markets along subsequent periods, and being also continuously innovating over the same periods, can be associated with increases in firms’ productivity. The underlying idea is that time recurrence of these strategies is related to the firms’ ability to optimize external knowledge flows enhancing their productivity. Design/methodology/approach By using data on Italian manufacturing firms over the period 1998–2006, the authors distinguish between repeated and temporary exporting firms, as well as repeated and temporary innovators, to test (through two-step system generalized methods of moments) the existence of any combined learning-by-exporting and learning-by-doing effects. Findings This paper provides empirical findings about persistent innovation efforts being better associated with a permanent presence in foreign markets. More in detail, persistently innovative and exporting firms have better productivity results than persistently exporting (innovating) firms with non-persistent innovation (export). Combining both strategies could be an opportunity to internalize knowledge flows coming from long-lasting exposure to foreign markets. These results hold especially for small firms. Originality/value The novelty of this paper is twofold. First, the authors argue that the temporal dimension of firms’ exporting and innovating activities may influence firms’ productivity. Second, while previous studies explored the role of export and innovation on productivity in isolation, the authors consider the joint effect of this relationship and also explore it across the temporal dimension finding evidence that they have a positive, reinforced effects if firms implement these activities continuously and jointly. In this case, the effect of innovation and export on productivity is significantly higher than if firms with intermittent strategies do not have the time to internalize knowledge flows coming from participating in export market.

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