Learning and Productivity of Swedish Exporting Firms: The importance of Innovation Efforts and the Geography of Innovation

This paper is concerned with the productivity and growth of Swedish exporting firms. Using data on 9,580 manufacturing firms with 10 or more employees for the period 1997-2008, it estimates a dynamic GMM model that captures both the impact of recurrent knowledge investment through innovation and potential spillovers from the local milieu. The majority of the exporting firms are non-innovative. The data reveal that patent applicants located in knowledge intense milieus account for almost 40 percent of total Swedish exports, but only 2 percent of the firms. From the regressions it is shown that, relative to a firm that does not engage in innovation and has scarce access to external knowledge, the level of productivity is 2-12 percent higher for an innovative firm, depending on how innovation is defined and where the innovator is located. The annual long-run growth rate is 0.2-0.7 higher for innovative firms. Moreover, the performance gap between innovative and non-innovative exporters increases with accessibility to external knowledge for the former.