Does innovation help to explain the effect of export on productivity ? Evidence from the French dairy industry

Abstract

While there is strong evidence that becoming an exporter increases a firm's productivity , underlying mechanisms that explain such a relationship remain largely unexplored. This paper analyses the contribution of the complementarity between exporting and investment in technology as a potential driver of export-related productivity gains. We employ firm-level data on production and trade combined with information on new products in the French dairy industry to conduct a causal mediation analysis between exporting, innovation investment, innovation output and productivity. Our estimation result show that starting exports increase the productivity by 8 percentage points. Our mediation analysis reveals that innovation (investment and output) explains 31% of this productivity growth.