Reconsider Learning by Exporting Hypothesis from Innovation: An Empirical Study of US Industries

Ruohan Wu
(Alabama State University, College of Business Administration, Department of Accounting & Finance, USA)

Abstract: This paper empirically studies the learning-by-exporting hypothesis through the channel of innovation. On the one hand, due to its exports, a sector’s productivity rises to a higher level because of its access to a wider market, as well as being introduced to intense global competition. This process is known as the “learning by exporting” theory. On the other hand, innovation can create a beneficial environment for industries or plants to grow, and therefore enhance the productivity even further. Hence the productivity gain conditional on the exports can be enlarged by fortified innovation effort. I estimate sectoral productivity using the Olley-Pakes methodology. Based on the industry-level data of US manufacturers from 2005 to 2009, I find that higher values of R&D input do have a positive effect on sectoral productivity improvement conditional on exports. Specifically, the R&D employment ratio should be higher than 6%, while the company-performed R&D funds should be at least 5%; otherwise a sector’s exports cannot improve its productivity significantly.

Key words: exports; productivity; innovation; learning-by-exporting

JEL code: C82, F14, F23, L60