Dissecting the impact of innovation on exporting in Turkey

Making use of an original firm level dataset, we explore the causal impact of innovation on the manufacturing firmexport activity in Turkey. We model process and product innovation as separately - through cost savings and product quality improvements, respectively - affecting the firm profitability and, consequently, the firm export propensity. This modeling choice highlights heterogeneous effects across high and low income destination markets. In a Multiple Propensity ScoreMatching framework, we, then, test the impact of each innovation activity and of their joint adoption. We find that only the latter fosters the first time entry into exporting, when the destination market is high income. Nevertheless, innovation positively affects the firm export propensity. New product introduction is more rewarding than process innovation, especially for exporting to low income economies. Process innovation, though, strengthens the positive role of product innovation for exporting to more advanced markets.