Learning From Exporting: New Insights, New Perspectives

Citation

Rodriguez, C.M. (2009), "Learning From Exporting: New Insights, New Perspectives", International Marketing Review, Vol. 26 No. 1, pp. 110-113. https://doi.org/10.1108/02651330910933221

The main proposition of this paper is that firms with access to external knowledge via exporting should become more productive innovators. Participating in exporting markets increases firms' innovative productivity. This is possible given that firms couple external knowledge with complementary capacities, which facilitate translating that knowledge into innovations. Overall, exporting has implications for the firm's profit, innovation, and competitive position in the market place.

Professor Salomon suggests that product innovation, which includes modifications and adjustment to existing products, is triggered by firms becoming exporters. Firms gather market and consumer data and incorporate them in the product strategies designed to reach product‐markets. The author makes a second proposition that exporting firms have access to knowledge that feeds the innovation production function of the firm without incurring in the typical FDI efforts. An interesting contribution is that different types of knowledge generate innovation in exporting firms. Market driven data drives product innovation and technology based data fosters patent applications.

Firms that engage in exporting endeavors need to adjust to changing external environments and dynamic markets. For example, cost‐based strategies enhance export performance in developed markets and differentiation strategies enhance performance in developing countries (Aulakh et al., 2000). Exporting firms cannot exploit competitive advantages without developing internal and external support capabilities (Madhok, 1998, 1997) as platform to strategic decision‐making. As firms become involved in exporting, they develop specific capabilities, i.e. international marketing experience and R&D intensity (Atuahene‐Gima, 1995), customer relationships and supply chain management (Piercy et al., 1998), and the ability to develop new products (Cavusgil and Zou, 1994). Successful exporting firms are the ones willing to enter more competitive and developed markets (Das, 1994). In contrast, less successful exporters may not have developed substantial abilities to modify products for international markets (Katsikeas, 1996), their production capabilities are limited (Katsikeas, 1994) and do not have competitive highly developed environmental scanning capabilities (Lim et al., 1996). Thus, firms to succeed in exporting may need to re‐align resources and processes using distinct capabilities that support value creating international strategies.

The findings in Professor Salomon's study suggest that firms that possess knowledge assimilation capabilities do not innovate more than those that do not have these capabilities given their particular exporting strategies. These conclusions challenge previous understanding on how these capabilities are aligned to improve performance, i.e. innovation. The author acknowledges that there may be an under conceptualization provided the way knowledge capabilities were operationalized in his study. The author remarked that some results may be driven by omitted variables; in essence a conceptual under specification of the model. Still, the findings are provocative and demand further validation.

The book starts with an overall introduction to the study, followed by Chapter 2 which covers the topic of the innovation process and the role of knowledge. This is complemented by a description of firms that innovate. Chapter 3 discusses how firms that have direct access to locally embedded knowledge are in the best position to exploit it. As such firms are motivated to expand into foreign countries because they search knowledge that resides in these markets. Professor Salomon proposes that exporting as a mean to establish local presence, allows benefiting from the knowledge in that country. Chapter 4 explores the impact of exporting behavior on firm outcomes, particularly innovation. These include external market characteristics, firm's characteristics, etc. The author sustains that most research to date considers exporting outcomes as the dependent variable. However, it remains unclear what drives export decision to export performance and suggest that a new theoretical framework is required. The author argues that using innovation as a measure of learning provides a better proxy to learning while exporting in comparison to the traditional productivity measure such as export performance.

Chapter 5 describes the data used to test the learning‐by‐exporting hypotheses. Professor Salomon provides details of the econometric models designed to test several hypotheses. Careful model design has been crafted when identifying the nature of the dependent variables and their nature. The statistical model was a Poisson and negative binomial regression specifications when the dependent variables are patent and product innovation (count measures) and a probit regression for the process innovation dependent variable (dichotomous). Chapter 5 is a discussion of the statistical methods use to test hypotheses. The sample was a panel of 3058 firms and data was from 1990 to 1997 combined with industry R&D data from 1980 to 1999 published by the OECD. The dependent variables are number of patents applied for by a firm in a given year, innovation output defined as product innovation and assessed as the total number of new products introduced by the focal firm in a given year.

Chapter 6 includes the most interesting findings and discussions of the study. The objective is to gain insight into the effect of exporting on firms' innovative productivity. Results showed that firms that enter export markets increase their innovative productivity. Exporting firms become more innovative after entering foreign markets. However, there is no moderating impact of knowledge assimilation competences on the relationship between exporting and innovation.

Chapter 7 explores how exporting strategies affect knowledge flows and influence innovative productivity. Interesting, size is not a significant predictor of product innovation among exporting firms. Breath of markets significantly impacts innovation efforts and employing a broker negatively influences product innovation as knowledge is not directly absorbed by the firm. Chapter 8 brings the analysis of systematic industry drivers of learning‐by‐exporting in an interest to find whether superior firms learn from exporting. Chapter 9 provides a summary of the most important findings and provocative ideas for further research. The book is complemented with several technical appendices for the reader interested in a deep treatment of the statistical methodology.

Previous research has shown that the degree of exporting competitiveness is sustained on incremental innovation that exploits existing firm's capabilities, assets, and skills. Firm's resources and capabilities may condition its ability to design and implement activities, routines, and business processes (Ray et al., 2004). Skills such as informational, customer relationship, product development, and supply chain and resources such as experience, physical resources, scale, and finance are linked to superior exporting performance (Piercy et al., 1998). In identifying export market opportunities, managers should evaluate the appropriateness of its resources and skills. For example, new product and process development are favored given a close alignment between the project and characteristics of core capabilities (Leonard‐Barton, 1992). When this alignment is not appropriately configured, then these capabilities become core rigidities and may hinder innovation and growth (Leonard‐Barton, 1992).

The findings in this study suggest that technical competence does not moderate the export intensity – innovation relationship. Mixed support exists to a positive relationship for firms with greater knowledge assimilation capabilities. However, firms with greater knowledge capabilities may buffer themselves from the negative impact of brokers on product innovation. As suggested by the author; firms with existing knowledge assimilation capabilities experience some benefits; however, this conclusion is not completely supported.

Professor Salomon's book is a refreshing look to a critical and challenging inquiry: does exporting foster innovation? New insights and a provocative perspective with concrete and challenging findings characterized this material. As such, I appreciate his effort and contribution to expanding our understanding of the role of exporting on innovation as firms search to become more competitive in their internationalization efforts. As always, new questions and research inquiries surface from such a rich and deep endeavor.