Can Innovation of Exporters Enhance Survival in Overseas Markets...
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中国科技论文在线
Can Innovation of Exporters Enhance Survival in Overseas
Markets: Evidence from Chinese Firms
#
Ziliang Deng
*
5
(School of Business, Renmin University of China)
Foundations: Research Funding for the Doctoral Programs of Higher Education, Ministry of Education, China
(Grant No. 20120004120005)
Brief author introduction:Ziliang Deng (1979-), male, associate professor, international business. E-mail:
ziliang.deng@ruc.edu.cn
Abstract: The massive collapse of exporters during the recent global financial crisis motivates
researchers to explore what factors have helped exporters survive. Using an interdisciplinary approach
by combining the strengths of industry-based view, resource-based view and institution-based view,
this paper examines the effects of technological innovation on exporter survival in foreign market, with 10
a panel dataset for 170,396 Chinese exporters over the period 1998-2008. Departing from the
conventional wisdom that innovation is always beneficial to exporting, this research shows that
innovation at times can be detrimental to exporter survival due to the “double liability” of foreignness
and innovativeness, particularly when industrial competition is strong. However, we also find that
innovation can enhance exporter survival when the firm is highly profitable and when the institutional 15
environment in which the firm is embedded is highly business-friendly. By demonstrating the
co-existence of the two opposing effects of innovation on exporter survival, this study enhances
understanding of how and under what conditions innovation promotes/impedes exports.
Key words: export, survival, innovation, industry-based view, resource-based view, institution-based
view 20
0 Introduction
In the downturn of international trade during the recent global financial crisis, many
exporters have been forced to contract their international businesses or even exit from foreign
market. It has been found that the reduced availability of external credit and shrinking market 25
demand are to blame for the failure of many exporters. The question is why other exporters
survived the financial crisis. As the effects of external factors depend on the internal strength of
the firm [1], one explanation might be that firms equipped with some unique capabilities are able
to survive unfavorable external conditions. For example, while shrinking market demand cut profit
margins for all firms due to reduced number of orders and declining export price, innovative 30
exporters might be less affected by engaging into innovations which may help them maintain
either a low cost structure or a high level of product differentiation. However, the benefits that
exporters can realize from product innovation do not come without costs. As exporters often rely
more on a stable and strong financial support for working capital and risk insurance than
non-exporters, they might consider it risky to defend their market position by using the innovation 35
weapon. Indeed, the two „faces‟ of innovation leaves the examination of the relationship between
innovation and exporter survival an intriguing empirical issue. Moreover it is of vital importance
to explore the above relationship not only for practitioners but also for policy makers as the
incumbent exporters play a dominant role in country-level export performances, compared to the
newly entering or exiting firms. 40
In spite of the importance of this topic, there has been barely any research explicitly
examining it. Previous literature has addressed two relevant topics, namely, whether innovation
can strengthen the competitive advantage of a firm in domestic market, and whether innovation
can enhance firms‟ export propensity and intensity. However, the research of these two
relationships can not tell us an explicit answer to the question of whether product innovation can 45
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