Internationalisation of firms and their innovation and productivity

Abstract

This paper examines the links between the internationalisation of firms and their innovation and productivity performance using data from Ireland over the period 2004–2008. Our econometric results indicate that, relative to firms that served the domestic market only, firms with international activities were more likely to invest in innovation, they were more likely to be successful in terms of innovation output, and they had a higher labour productivity. In line with the most recent literature on international trade with heterogeneous firms, our empirical evidence shows that, among firms with international activities, labour productivity was higher in foreign affiliates in comparison to domestic exporters.