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Sustainability 2016, 8(11), 1173; doi:10.3390/su8111173

Does Firms’ Innovation Promote Export Growth Sustainably?—Evidence from Chinese Manufacturing Firms

School of Economics and Management, Southeast University, Nanjing 210000, China
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Author to whom correspondence should be addressed.
Academic Editors: Hongbo Liu, Sizhong Sun and Iain Gordon
Received: 22 September 2016 / Revised: 1 November 2016 / Accepted: 9 November 2016 / Published: 15 November 2016
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Abstract

Recent theoretical analysis and empirical studies have emphasized that firms’ innovation could significantly improve export growth. However, the positive effect of innovation on exports is likely to change due to unstable domestic offsetting for innovation and increasing worldwide competition for trade. This study aims to explore the dynamic link between them. We first develop a theoretical model between innovation and export growth based on the theory of heterogeneity. Export growth is measured through the dimensions of extensive margin and intensive margin so as to better investigate the effect of innovation on export performance. The propositions of mechanism analysis reveal that the effect of innovation on exports is non-linear rather than sustainable. An empirical study is followed to test the propositions by using data from a representative panel of Chinese manufacturing firms. Consistent with the theoretical predictions, the results show an inverted U-shaped relationship between innovation and extensive margin and a U-shaped relationship between innovation and intensive margin. The non-linear relations are verified by a threshold effect test. Further study shows less innovation and more firms on the left side of the relation curves. The distribution suggests irregular innovation ability among the exporters. Moreover, the role of innovation is more important for export growth and the corresponding threshold is higher in terms of high technological sectors. The contribution of this study is to introduce a comprehensive framework to investigate the dynamic effect of innovation on export growth, serving as a modest spur to induce the following studies to explore the sustainability of innovation effect. View Full-Text
Keywords: innovation; export growth; sustainability; threshold effect innovation; export growth; sustainability; threshold effect
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Hao, L.; Qiu, B.; Cervantes, L. Does Firms’ Innovation Promote Export Growth Sustainably?—Evidence from Chinese Manufacturing Firms. Sustainability 2016, 8, 1173.

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