Tesis
Foreign market size and firm innovation evidence for developing countries manufacturing firms
Autor
Herraiz G., Pelayo
Institución
Resumen
Utilizing data for developing countries manufacturing rms we construct and
estimate the impact of an exogenous foreign market size measure on rm inno-
vation on the extensive margin. Our data allows us to di erentiate between
innovative outputs, that is innovation through the introduction of new/improved
products or production processes. We nd an overall positive impact of foreign
market size on a rms probability to innovate in both dimensions. This e ect
is more prominent for product innovation. We also nd di erent heterogeneous
e ects. First, we nd that rms atop the productivity distribution are more
likely to innovate via products when foreign demand expands. Our evidence also
suggests that accessing foreign markets spurs innovation. Given that entering
foreign markets is costly we nd evidence that in countries with better credit
availability rms innovate more on the product dimension when world demand
increases and that for introducing new processes an industry's dependence of
external funds reduces this type of innovation. One key di erence between our
ndings and previous literature for developed countries is that we nd an aver-
age positive e ect of the foreign demand shocks. Our results are consistent with
a dominance of the escape competition e ect over the rent dissipation e ect.