“Innovation and the Intensive and Extensive Margins of Trade: Evidence from French Firms” by Dr. Liza Jabbour
Dr. Liza Jabbour
Lecturer in Business Economics
The Department of Business and Labour Economics
University of Birmingham
This paper examines the relationship between innovation and the export behaviour of firms. Using data from over 27,000 French firms for the period 1999-2007 we apply a propensity score matching (PSM) and difference-indifferences (DiD) approach at the firm level to examine the impact of innovation on both the extensive and intensive margins of trade. We take into account both input and output measures of innovation (R&D expenditure and indicators of product and process-innovation respectively). Our results show that, in general, innovation has a positive impact on exports driven mainly through the extensive margin but that this positive impact can take between two and three years to take effect. The main beneficiaries are firms that successfully introduce both product and process innovation in the same year. For these firms the average value of exports per shipment (intensive margin) was around 32.5% higher than the control group two years after the initial implementation whilst the number of products exported and destination countries was 11.5% higher after two years and 12.6% higher after three years respectively. The positive impact of innovation is driven mainly by medium sized and domestic French firms. In contrast, large firms are shown to experience a temporary fall in the number of products in the year of innovation.