Learning by exporting: Evidence from patent citations in China

Abstract

Using matched firm-level data on operations, trade, and patents in China, we empirically investigate the impact of exporting on firms’ innovation and learning from destinations. We first show that access to export markets improves both the quantity and quality of innovation. We then construct a measure of knowledge flows based on Chinese patent citation data and demonstrate that there are actual knowledge transfers from destination markets to exporting firms, which help firms improve their innovation. These findings support the learning-by-exporting effect. Moreover, we show that this learning effect remains significant and unchanged, even after controlling for the spillover effect of FDI. To investigate how the learning process occurs, we also explore whether the learning-by-exporting effect varies with different export products or export modes. We find that vertical linkages and direct exporting facilitate Chinese firms’ learning from destination markets. Finally, we show that the learning effect is particularly salient at the extensive margin compared to the intensive margin.