한국생산성학회

The Product Life Cycle Theory developed by Vernon explains the observed patterns of international trade that the Heckscher-Ohlin model fails to explain. In the new product stage, the theory explains, the product is produced and consumed in the invented area, usually developed country, but no export trade occurs. In the maturing stage, mass-production technologies are developed and foreign demand in the developed countries expands but the producer now export the new product to other developed countries. In the standardized product stage, production can move to the developing countries, which then export the product to developed countries. This theory suggests that the new innovation should cause export the product, not the other way around. On the other hand, the traditional trade theory suggests that exports can cause a new innovation through learning by exporting. However, theories do not tell the direction of causality between export and innovation. This paper empirically examines the effects of new product innovation and production procedure innovation on export intensity and export decision for Korea's manufacturing companies using the 2008 and 2010 Korean Innovation Survey data. In estimating the relationship between export intensity and innovation activities as well as that between export decision and innovation, it controls for simultaneity and inconsistency of those variables. Empirical results are summarized as follows. First, the exogeneity hypothesis for export decision, export intensity, and innovation activities is rejected, meaning that estimation by the simple OLS and Probit methods can produce biased results. Thus, an increase in export intensity leads to an increase in innovation activities and the other way around. Second, the internal and external technology innovation activities as an input of innovation are also found to be statistically significant, implying that innovation is main sources of export competitiveness and an important factor to explain firms heterogeneity. Third, the export intensity and firm size are found to have inverse U-shaped relationship. Finally, for all firms, export intensity are positively associated with innovation, implying that the larger the innovation is, the higher the export intensity is. The estimated coefficients of new product innovation are found to be larger than those for production procedure innovation. This implies that government R&D subsidy may have a stronger effect on exports for new product innovation, specially for SMEs.