---
title: "Innovate to Export or Export to Innovate? Evidence from Chile"
date: 2026-08-03
updated: 2026-08-03
tags: [innovation, exports, manufacturing, Chile, economics]
canonical: https://www.fernandogreve.com/blog/2026-08-03-innovate-to-export
---
# Innovate to Export or Export to Innovate? Evidence from Chile

*Updated: 2026-08-03*

> **TL;DR:** In a 2014 article in *Estudios Públicos* with Eduardo Bitran, Cristián González, and Marcelo Villena, we test the direction of causality between innovation and exporting in Chilean manufacturing firms over 1995–2010. In most subsectors, export propensity Granger-causes greater innovation effort — participation in global markets pushes firms to innovate, not the other way around. Minerals/base metals and metal-mechanics show mutual causality; wood and paper show none.

## Why does the direction of causality matter?

There is broad consensus that exporting firms are more productive than non-exporters (Bernard & Jensen, 1999), that innovation raises firm productivity (Crépon, Duguet & Mairesse, 1998), and that exporting itself can stimulate R&D (López Rodríguez & García Rodríguez, 2005). Exporting, innovation, and productivity are tightly linked — but **which causes which?** If innovation comes first, policy should subsidize innovation and let exports follow. If exporting comes first — the *learning-by-exporting* channel — then export promotion is the more efficient instrument. The literature also documents *mutual reinforcement*, where both directions operate at once (Filipescu et al., 2013), so the question is empirical and must be answered case by case.

## What does the paper do?

[The paper](/publications/innovate-to-export-chilean-manufacturing) builds an econometric model for Chilean manufacturing subsectors over **1995–2010**, controlling for each firm's productivity level. Two design choices distinguish it from earlier studies: it uses **total innovation expenditure rather than only R&D**, capturing a wider range of productivity-seeking activities inside the firm, and that broader measure allows a larger sample of firms to be studied.

## What did we find?

Using Granger-causality tests by subsector:

- **In most subsectors, export propensity causes greater innovation effort** — global market participation comes first, innovation follows.
- **Minerals and base metals, and metal-mechanics** show *mutual* Granger causality: exporting and innovation reinforce each other.
- **Wood and paper** show no statistically significant causality in either direction.

## What does this mean for policy?

For an economy like Chile's, the results favor instruments that push firms into global markets — the discipline and learning that come with exporting trigger innovation spending. A policy mix that treats innovation subsidies as the sole lever would miss the stronger channel running from exports to innovation.

The full text, citation, and BibTeX are on the [publication page](/publications/innovate-to-export-chilean-manufacturing). The article appeared in *Estudios Públicos*, issue 134 (Fall 2014), pages 109–130.

*Section: Research*
*Tags: innovation, exports, manufacturing, Chile, economics*