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Lachenmaier, Stefan; Wößmann, Ludger (2004): Does Innovation Cause Exports? Evidence from Exogenous Innovation Impulses and Obstacles. CESifo Working Paper, 1178
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Trade and growth theories predict a mutual causation of innovation and exports. We test empirically whether innovation causes exports using a uniquely rich German micro dataset. Our instrumental-variable strategy identifies variation in innovative activity that is caused by specific impulses and obstacles reported by the firms, which can reasonably be viewed as exogenous to firms� export performance. We find that innovation attributable to this variation leads to an increase of roughly 7 percentage points in the export share of German manufacturing firms. The evidence is robust to several alternative specifications, similar for product and process innovations, and heterogeneous across sectors.