‘Learning to export’ and ‘learning to innovate’: Revisiting the relationship between innovation and exports in African firms

10 May 2021
Publication Type: Working Paper
JEL Code: D00, D12, D22, D40, F14, I18, L25, O12, O32, O40, O41, O55

This paper examines the relationship between innovation and export performance for African firms. We use Tobit simultaneous equation full information maximum likelihood (FIML) model with selection on a crosssectional dataset from the World Bank’s Enterprise Surveys for 28 African economies. The paper provides new evidence of a two-way positive relationship between innovation and export performance in African firms: innovation is important for both the ability to export (export propensity) and for export intensity, while exporting also increases the likelihood of innovating. These effects are driven mainly by direct exports and apply to both product and process innovation. We argue that these results point to a two-way relationship in which innovation enables firms to ‘learn to export’, while firms also ‘learn to innovate’ through exporting. A higher share of foreign ownership in firms, as well as firms having an internationally recognised quality certification strengthen the positive effects in both directions.

Series title: Working Paper 862
1 May 2021
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