Are exporters more likely to introduce product innovations?

A firm\u2019s export status may improve its ability to introduce product innovations (learning by exporting). We explore this idea using very rich firm-level data on Italian manufacturing, which enables us to control for many confounding factors in the exporting\u2013product innovation link (i.e. selection on observable variables). We also make an attempt to address the potential self-selection of firms into exporting according to unobservable characteristics using an industry\u2013province specific measure of firm distances from their most likely export markets, and of these export markets\u2019 potentials as sources of presumably exogenous variations in export status using an instrumental variables strategy. We find that export status significantly increases the likelihood of introducing product innovations and that this effect is not fully captured by the channels commonly stressed by the theoretical literature, such as larger markets (and accordingly firm size) or higher investments in R&D. We argue that heterogeneity in foreign customers\u2019 tastes and needs may explain our finding