Are firms supplying goods to foreign firms more innovative?

What is it about?

We use European firm-level survey data to provide some robust empirical evidence that suppliers engaged in production to order (PTO) for foreign firms are more likely to introduce product innovations than those engaged in PTO for domestic firms, even when differences in size, R&D and productivity are controlled for. We propose a theoretical model to rationalize this finding.

Featured Image

Photo by Martin Adams on Unsplash

Photo by Martin Adams on Unsplash

Why is it important?

This is important as we show that a firm's engagement in foreign markets may represent an important source of product innovation.