How Does an Industry Thrive More From Exporting? A Theoretical Analysis of the Learning-by-Exporting Effect with Innovation and Asymmetric Demand

Ruohan Wu^1,

¹College of Business Administration, Alabama State University, Montgomery, AL, US

Cite this paper:
Ruohan Wu. How Does an Industry Thrive More From Exporting? A Theoretical Analysis of the Learning-by-Exporting Effect with Innovation and Asymmetric Demand. Journal of Finance and Economics. 2014; 2(2):50-57. doi: 10.12691/jfe-2-2-2

Abstract

This paper introduces asymmetric demand into an open-economy model. Domestic industries exhibit different export capabilities, and the export market attaches different preferences to them. My model shows how exports influence the market structure and productivity growth. If an industry exports more, the firms within the industry would face a higher domestic-market but lower export-market entry threshold. The industry can exhibit a significant learning-by-exporting effect; that is, its exports can significantly increase productivity growth, only when its innovation expenditure is sufficiently high.

Keywords:
asymmetric demand exports productivity growth learning-by-exporting innovation

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