Dissecting performance gains from export-induced marketing and technological investments: Revisiting learning by exporting in Indian manufacturing

• Published in: The Quarterly review of economics and finance 2024-10, Vol.97, p.101886, Article 101886
• Main Authors: Arneja, Nitika, Sharma, Chandan
• Format: Article
• Language: English
• Subjects: Exports; Firm performance; Learning by exporting; Learning to export; Marketing; R&D
• ISSN: 1062-9769
• DOI: 10.1016/j.qref.2024.101886

The impact of export decisions on firm performance has been extensively studied empirically, yet little attention has been given to the investments resulting from these decisions and their subsequent returns. Moreover, existing research predominantly examines export choices from a technological perspective, with minimal emphasis on the marketing aspects of exporting. Our study offers new insights by examining whether exporting induces firms to invest in marketing and research and development (R&D), and how these investments affect their performance before and after entering export markets. Using a panel of Indian firms from 2002 to 2019, our two-step methodology employs propensity score matching (PSM) to extract export-induced expenditures and production function estimation to assess their impacts on firm performance. The findings reveal that both export-induced marketing and R&D expenditures positively influence firm performance, with marketing investments exhibiting a stronger impact. The combined effect becomes significantly evident post-export entry. We also utilized the instrumental variable (IV) method to validate our findings. Heterogeneous IV analysis highlights that mature firms and those facing financial constraints particularly ramp up these investments post-export entry. Our results hold implications for managers and policymakers, emphasizing the importance of carefully designing export investment policies alongside other export support programs. •We examine whether export entry induces investments in marketing and R&D and how investments relate to overall performance.•Analysis utilizes comprehensive Indian firm-level data for 2002-2019 and employs matching method.•Combined effect of export-induced marketing and R&D becomes significant post-export entry.•Marketing priorities shift from operational to promotional efforts after entering the export market.