Centre for Vocational Education Research LSE RSS Email Facebook Twitter


CEP report
Internationalization and Innovation of Firms: Evidence and Policy
Carlo Altomonte, Tommaso Aquilante, Gábor Békés and Gianmarco I. P. Ottaviano April 2014
Paper No' CEPSP32:
Full Paper (pdf)

JEL Classification: F13; F23; F68; O31; O38

Tags: internationalization; innovation; firm-level data; exports; foreign direct investment; outsourcing

We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium-to-long term, internationalization is driven by innovation. We recommend coordination and integration of internationalization and innovation policies ‘under one roof’ at both the national and EU levels, and propose a bigger coordinating role for EU institutions.