Learning from Exporting

Learning from Exporting

New Insights, New Perspectives

Robert Salomon

This book explores the relationship between exports and productivity. Whilst a body of research indicates that exporters have superior productivity to non-exporters, received wisdom suggests that this is because productive firms became exporters. Robert Salomon approaches this issue from a different angle. He argues that exporters can access diverse knowledge inputs that are not available in the domestic market, and that this knowledge can spill back to the focal firm and, through learning, can foster increased innovation. Therefore, exporting can also make firms more productive.

Chapter 2: Innovation

Robert Salomon

Subjects: business and management, international business


INTRODUCTION Innovation has been recognized as a powerful means by which firms can create and sustain competitive advantage. However, where does innovation come from? Are innovations distributed randomly as a function of external chance events, completely exogenous to the firms trying to achieve them? Or can firms strategically and deliberately innovate so as to create a competitive advantage? This chapter explores the innovation process and examines the internal and external inputs that influence firms’ innovative performance. Although I will review a vast innovation literature in this chapter, there are several main points to take away. First, agents external to the focal firm (that is, suppliers, customers, competitors and the like) are excellent sources of the knowledge that drives innovation. Second, firm capabilities are a key input to the innovation process and thereby influence innovative output. Finally, innovation, while a function of certain individual inputs, is also dependent upon interactions of those inputs. While I will describe the innovation process in some detail below, it is important to note that the discovery and realization of an innovation principally revolves around the use of resources and capabilities available to the firm. As such, I define innovation as new combinations of existing resources and capabilities (Schumpeter, 1934; Penrose, 1959). Innovations may include new or improved products or services, new or improved organizational processes, new or improved organizational designs, or the opening of new markets previously inaccessible to the firm (Schumpeter, 1942; Afuah, 1998). They may be realized in forms that...

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