Innovation and the Export Performance of Firms in Transition Economies: the Relevance of the Business Environment and the Stage of Transition

Abstract

This paper investigates the impact of product and process innovation on firms' export performance in transition economies (TEs) which embarked on a systemic change from a planned to a market economy in the early 1990s. The research builds on the technology gap theory and the analysis of the self-selection of firms into the export market. Unlike other studies that have focused on the export behaviour of firms in developed economies where business environment is generally stable and favourable, the paper controls for the relevance of business environment and the stage of transition on export performance of firms. The paper uses the firm-level Business Environment and Performance Survey data undertaken by the European Bank for Reconstruction F. Reçica et al.

The effect of product innovation on the export performance of Kosovo SMEs

“…Moreira and Silva (2013) conclude that market orientation positively influences the development of new products and influences product innovation. According to Reçica et al (2019) in the more advanced stages of the transition process, innovations related to the introduction of new and updated products/services proved to have a significant impact on export performance. The impact is stronger on new products than on updated products, which indicates the importance of the degree or level of product innovation.…”

Managerial Characteristics and Export Performance – Empirical Evidence from Kosovo

“…Breinlich et al (2017) criticise the Melitz framework and studies using and augmenting this approach, claiming that its assumptions concerning full information and absence of uncertainty do not hold. Most of the studies regarding transition economies use an augmented version of the Melitz model and neglect the impact of management characteristics (Shinkle and Kriauciunas 2010;Holzner and Peci 2014;Gashi, Hashi, and Pugh 2014;Cieslik et al 2015;Cieslik, Michalek, and Nasaudik 2015;Cieslik, Michalek, and Tovias, 2017;Recica et al 2018).…”

“…An uncertain and non-conducive domestic environment, however, might act as a push factor encouraging firms to shift their attention to exporting. Firms that perceive their domestic business environment as having fewer opportunities because of business barriers will tend to offset the perceived domestic market risks by exporting their new or significantly improved products to a relatively safer market (Recica et al 2018). Both formal and informal institutions can reflect the extent to which a firm can rely on an environment of stability, consistency, and predictability (LiPuma, Newbert, and Doh 2013).…”

“…Also, there is a need for more research concerning the characteristics and attitudes of the managers on the export performance of small firms (del Río Araújo and Neira, 2006), while still controlling for business environment variables in the model (Lipuma et al 2013). Studies considering transition economies focus predominantly on the influence of firm characteristics and external or institutional barriers (Damijan and Rojec 2007;Gashi, Hashi, and Pugh 2014;Cieslik et al 2015;Aralica, Svilokos, and Bacic 2018;Recica et al 2018;Srhoj, Škrinjarić, and Radas 2018;Vitezic, Srhoj, and Peric 2018), often neglecting the influence of management characteristics. Regarding the transition economy of Kosovo, to our best knowledge, only a few studies have analysed the determinants of export performance focusing on business obstacles , migration networks (Peci, Holzner and Kutllovci 2010), human capital (Gashi 2014), and innovation (Recica et al 2018).…”

Economics of Technology Innovation for Sustainable Growth: With Reference to Sub-Saharan Africa (SSA)

“…This then makes it possible for Price at P1 to move down to P2, thereby resulting in higher output from Q1 to Q2. As explored by Recica et al (2019) in their empirical study on innovation and the export performance of firms in transition economies, there is high opportunity for new product innovation to bring about significant impact on export performance, given the novelty of consumers' taste toward new products in the market.…”