Modelling two-way relationship between innovation and internationalisation: does learning by export matter?

Abstract

This study has picked up an essential question for the Indian pharmaceutical industry, whether innovation and internationalisation follow a two-way relationship during the product patent regime. This study analyzes the role of product, process and variety of innovation on exporting activities of 168 pharmaceutical firms from 2006 to 2013. For this purpose, this study applies two-stage least square probit and tobit model on innovation and export equation separately. The results show the feedback relation between export and innovative performance while there is a differential effect of product and process innovation on exporting. The results strongly support the learning-by-exporting and product-life cycle hypothesis. European origin firms are more likely to be innovative and export-oriented, while U.S. origin firms influence the firms' innovative performance. Business strategy should take account of benefits from the dynamic interaction of innovative and exporting activities and make their strategic decisions carefully. © 2021 Denfar Transnational Development INC.