Internationalisation and innovation are interconnected, with firms that export goods or services often being more innovative than those that don’t. This connection is due to external competition, which encourages companies to improve their products and services.
Firms that export to several countries are typically more innovative than those that export to just one. These multi-country exporters often have more resources to invest in innovation. They also face a wider range of competition, which can spur them to innovate further.
However, the relationship between internationalisation and innovation is not straightforward. While exporting can lead to increased innovation, it can also lead to a focus on cost reduction, which can stifle innovation. Additionally, the benefits of internationalisation may not be evenly distributed, with larger firms often benefiting more than smaller ones.
The type of innovation also matters. Product innovation, which involves creating new products or improving existing ones, is often more beneficial than process innovation, which involves improving the way products are made or services are delivered.
Policies aimed at encouraging internationalisation and innovation should therefore consider these complexities. They should aim to support firms of all sizes and promote both product and process innovation. They should also consider the potential negative effects of internationalisation, such as increased competition and cost pressures.
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