Abstract
We investigate the effects of better access to foreign markets on innovation strategies of multi-product firms in industries with different scope for product differentiation. Industry-specific demand and cost linkages induce a distinction between the returns to innovation. In differentiated industries, cannibalization is lower and firms invest more in product innovation. In homogeneous industries, firms internalize intra-firm spillovers and invest more in process innovation. Using firm-level data and large exchange rate devaluations, we show that better access to foreign markets increases the incentive to innovate. However, we exploit differential effects across industries and show that the innovation strategies depend on the scope of differentiation.
Item Type: | Paper |
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Faculties: | Economics > Chairs > Seminar for International Trade Theory and Trade Policy |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | F12, F14, L25 |
Language: | English |
Item ID: | 60240 |
Date Deposited: | 29. Jan 2019, 14:13 |
Last Modified: | 29. Jan 2019, 14:13 |