Innovation, finance and the probability to export

Abstract

This paper examines the effect that innovation and variables able to capture firms’ access to finance exert on the probability of European SMEs to become newly exporting companies or exit from foreign markets. To accomplish such a task, we employ firm-level data and statements provided by the ECB SAFE for the years 2014-2016. By exploiting the panel dimension of our dataset, we show that product and process innovations increase the likelihood of a firm to turn from a non-exporter to exporter. Furthermore, firms that have used their obtained financing to develop and launch new products and services enjoy a higher likelihood to make the switch. Similarly, firms, which declared to have embarked in product and organizational innovation benefit from a lower likelihood to stop exporting and becoming exiters. Consistently with previous findings, firms that have used their obtained financing to develop and launch new products and services face a lower likelihood to become an export exiter. These effects hold after controlling for type of ownership, firm performance, as well as for the regulatory environment. Results turn to be robust to different specifications and endogeneity concerns.