Effects of Innovations on Margins of International Trade: Evidence with Firm Level Data of Selected South Asian Countries

Abstract

In an increasingly globalized world, firms and countries are continuously striving for export competitiveness to increase their export shares in international markets. This study investigates the effects of different types of innovations on extensive and intensive margins of exports by using data of manufacturing firms operating in four South Asian countries. We use the probit, and fractional response model as estimation techniques. The results of the study reveal that process, management, and marketing innovations have positive and statistically significant effects on both extensive and intensive margins of exports. These results suggest that South Asian countries should facilitate firms to engage in innovative activities which provide a sustainable, competitive advantage for firms in international market.