Self-selection into Exports: Productivity and/or Innovation?

Recent research has related the firm decision to export with firm innovation activities and productivity. The aim of this paper is to disentangle the direct and indirect links through which self-selection into exports, coming both from productivity and innovation, may operate. For this purpose we use Spanish manufacturing firm data for the period 1990 – 2000, drawn from the Encuesta sobre Estrategias Empresariales. The main results we obtain can be summarized as follows. First, there is a self-selection into exports direct effect coming from productivity. Second, there is also a self-selection indirect effect into exports stemming from productivity to the probability of exporting through process innovations: the higher the productivity the higher the probability of introducing process innovations and, therefore, the likelihood of starting to export. Third, there is a self-selection into exporting indirect effect of process innovations that operates through productivity: process innovations increase productivity and, therefore, the probability to export.