Does Export Trade Promote Firm Innovation?

With globalization, exports as a leading means for firms to operate internationally can not only help firms expand their market and gain economies of scale, but also provide opportunity to gain international experience and technological know-how. Using data of Chinese industrial firms and customs data from 2001 to 2007, this study empirically tests the impact of export trade on innovation. The results show that firms' participation in exports can significantly increase the likelihood of product innovation. Moreover, this study further verifies the impact mechanism and finds that the magnitude of the export learning effect is less than that of the market size effect. This study provides new ideas for China's trade transformation and upgrading, and has policy significance for guiding international operations of firms, maintaining a free international trading system, and stimulating firm exports.