How Does Innovation Activity Affect Firm Export Behavior? Evidence from China

Innovation activity largely determines how efficiently products of a firm match the preference of foreign consumers, and in turn significantly affects firm export behavior. This article sheds light on how innovation activity affects firm export behavior from the perspective of the dual export margins. The results from the theoretical analyses show that firm innovation activity promotes the expansion of an extensive export margin while having an ambiguous impact on the expansion of intensive export margin. Using micro-level data from Chinese manufacturing firms, we conclude that our empirical results are roughly in line with the theoretical propositions. In addition, the impact of innovation activity on the intensive export margin is significantly negative for China's manufacturing firms. Furthermore, the effects of innovation activity on the dual export margins are significantly different among firms with differentiated characteristics, on which we also present some explanations to generate insights of the empirical results. The findings are robust to the alterative indicator for innovation or different estimation models.