SELECTIVE LEARNING-BY-EXPORTING: FIRM SIZE AND PRODUCT VERSUS PROCESS INNOVATION

We further examine the ‘learning-by-exporting’ phenomenon, suggesting that firms gain from the learning opportunity of foreign markets, as they make choices that better fit the specific needs of their innovation strategy. We contend that firms’ size affects these needs, with large firms being more inclined to pursue process innovations, while SMEs focus on product innovations. Using a panel of Spanish firms (1990-2002), we find evidence consistent with our hypotheses. Large firms engage in more process innovation once they enter export markets, with the effect being most pronounced two years after the entry. SMEs, conversely, start pursuing more product innovation before they enter the export markets. This last pattern seems to indicate an ‘innovating-for-export-markets’ relationship.