Exporting quality: is it the right strategy for the italian manufacturing sector?, MPRA Paper 13327

ABSTRACT: Recently, most European manufacturing firms have been engaged in a number of innovative activities to survive the growing competition coming from newly-industrialising countries. Italian manufacturing industry, which relies on small and family-controlled firms, is struggling to regain competitiveness in global markets. Departing from these stylised facts and building on a conceptual model, this paper aims at understanding the determinants of the propensity of Italian small- and medium-sized firms to export. Specifically, we investigate whether innovating activities and quality goods ’ production have any effect on firm’s probability to be exporter. We find that both products ’ quality and innovative activities (divided into: product, process, organisational and market-related) affect considerably small- and medium-sized firms ’ likelihood to export. Moreover, our finding suggests that high-quality firms ’ advantage in exporting is limited to some traditional sectors (food and beverage, clothing, footwear and leather, metal products and mechanical products). It follows that quality strategy is effective for the production and exports of specific goods, but cannot be considered as a general strategy to revitalise manufacturing exports as a whole. Using the Chow test, we find evidence for a structural break produced by quality, which results in substantial differences between high- and low-quality firms. In particular, our findings suggest that, on the one hand, high-quality firms are more likely to export if they introduce product and marketing innovation an