Does Innovation Promote Exports? Evidence from Chinese Manufacturing Firms

This paper investigates how innovation contributes to export growth by modelling the link between the stock of past patent applications and values of exported goods. Using a rich set of firm-level trade data from China (2000 to 2006) and patent application data, the present study finds that past patent applications are positively correlated with export growth in both static OLS and fixed effect panel regressions. In addition, the result shows that special economic zones in China strengthen this link between innovation and export growth in that firms located in special economic zones show faster growth in exports. As for types of trade, firms participating in processing manufacturing enjoy higher export growth incurred by past innovations, and the result is robust in both OLS and panel settings.