Innovation and Export Performance: Evidence from Uk and German Manufacturing Plants

Using comparable plant-level surveys we demonstrate significant differences between the determinants of export performance among UK and German manufacturing plants. Innovation, however, measured has a strong and systematic effect on the probability and propensity to export in both countries. The scale of plants' innovation activity is positively related to export propensity in both countries. In the UK the scale of plants' innovation activity is also related positively to export propensity. In Germany, however, where levels of innovation intensity are significantly higher, a trade-off is evident between further increases in innovation intensity and export probability. Moreover while the determinants of export performance are similar for German innovator and non-innovators significant differences are identified between innovative and non-innovative UK plants. In particular innovative UK plants are found to more effective in their ability to exploit spill-overs from the innovation activities of supplier companies and other firms in their sector. Perhaps reflecting demand-side influences, however, co-location to other innovative firms is found to discourage exporting regardless of plants' innovation performance. Acknowledgement We are grateful to Julie Anderson for excellent research assistance.