FDI and Innovation as Drivers of Export Behaviour: Firm-level Evidence from East Asia

This paper examines the links between ownership, innovation and exporting in electronics firms in three late industrializing East Asian countries (China, Thailand and the Philippines) drawing on recent developments in applied international trade and innovation and learning. Technology-based approaches to trade offer a plausible explanation for firm-level exporting behavior. The econometric results (using probit) confirm the importance of foreign ownership and innovation in increasing the probability of exporting in electronics. Higher levels of skills, managers’ education and capital also matter in China as well as accumulated experience in Thailand. Furthermore, a technology index composed of technical functions performed by firms emerges as a more robust indicator of innovation than the R&D to sales ratio. Accordingly, technological effort in electronics in these countries mostly focuses on assimilating and using imported technologies rather than formal R&D by specialized engineers.

JEL Codes: F23, O31, O32, L63, O57

Key words: foreign direct investment, innovation, technological capabilities, R&D, firm-level exports, electronics, East Asia, China, Thailand and the Philippines

UNU-MERIT Working Papers ISSN 1871-9872