Efficiency, Innovation and Exports

Previous research (on countries other than the UK) finds better-performing firms to be more likely to export. We test this hypothesis for UK firms. The relationship between exporting and firm variables is significantly different for firms that have experienced a major innovation ("innovating firms"). Non-innovating firms are more likely to export if they have lower unit labour costs, whilst innovating firms are more likely to do so if they have had more innovations. Ceteris paribus, the probability that a firm is an exporter is higher if it is in a sector with high R&D expenditures (relative to output), which is consistent with product cycle theories of trade. For non-innovators, firms are also more likely to be exporters in sectors with low capital intensity