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Openness and Innovation

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  • Ben Shepherd

Abstract

This article uses firm-level data for India to examine the determinants of innovation activity, focusing on variables related to economic openness. Firms that export and those that import are found to be significantly more likely to engage in innovation, defined sequentially as the introduction of new products, new processes, new systems, or devotion of financial resources or time to research and development. Concretely, exporters are 22 per cent more likely to introduce a new product than non-exporters, while the corresponding figure is 66 per cent for importers. Openness to trade is, therefore, a key determinant of firm-level innovation, which is a key component of economic growth.

Suggested Citation

  • Ben Shepherd, 2017. "Openness and Innovation," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(1), pages 64-75, March.
    • Handle: RePEc:sae:soueco:v:18:y:2017:i:1:p:64-75
    DOI: 10.1177/1391561416689748
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    References listed on IDEAS

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    1. Daria Taglioni & Deborah Winkler, 2016. "Making Global Value Chains Work for Development," World Bank Publications - Books, The World Bank Group, number 24426.
    2. Liu, Qing & Qiu, Larry D., 2016. "Intermediate input imports and innovations: Evidence from Chinese firms' patent filings," Journal of International Economics, Elsevier, vol. 103(C), pages 166-183.
    3. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
    4. Murat Şeker, 2012. "Importing, Exporting, and Innovation in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 299-314, May.
    5. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1727-1767.
    6. Susan Stone & Ben Shepherd, 2011. "Dynamic Gains from Trade: The Role of Intermediate Inputs and Equipment Imports," OECD Trade Policy Papers 110, OECD Publishing.
    7. Brach, Juliane & Kappel, Robert, 2009. "Global Value Chains, Technology Transfer and Local Firm Upgrading in Non-OECD Countries," GIGA Working Papers 110, GIGA German Institute of Global and Area Studies.
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    Cited by:

    1. Dung Nguyen‐Van & Chia‐Hua Chang, 2021. "Internationalization and product innovation in ASEAN: The moderating role of organizational innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(2), pages 437-462, March.

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    More about this item

    Keywords

    Trade; innovation; firm-level data;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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