J Manag Gov (2012) 16:393–423

DOI 10.1007/s10997-010-9157-y

Innovation and export performance: a study of Italian

high-tech SMEs

Alfredo D’Angelo

Published online: 5 August 2010

Ó Springer Science+Business Media, LLC. 2010

Abstract The objective of the paper is to examine the influence of innovation

measures on the export intensity of Italian high technology small and medium firms.
In fact, despite a growing number of empirical studies attempting to guide the
approximation of the value of innovation and its relative impact on the export
intensity, a distinction between innovation input and output indicators, both internal
and external to the firms has not been clearly established. Drawing on the innovation
and export management literature, we used a sample of Italian firms operating in the
high tech settings within the manufacturing industry (HTSMEs). Applying a 3 years
lag time approach, we ran various Tobit regression models. Our empirical results
revealed that: (1) R&D employees do positively and significantly impact the export
intensity of HTSMEs, whereas R&D expenditures do not; (2) the use of ‘Univer-
sities’ as external R&D partners has a positive influence on the export intensity of
HTSMEs; (3) ‘Product innovations’ and the ‘Turnover derived from innovative
activities’ positively and significantly affect the export intensity of firms in our
sample.

Keywords Export intensity  Innovation  R&D  High technology small

and medium firms

1 Introduction

The advent of information, communication and technological advances, the falling

barriers to international trade and the emergence of homogenous global preferences
have changed the worldwide economy, characterized the firms’ business behaviour

A. D’Angelo (&)
Department of Economics, Business and Statistics. Faculty of Political Science,
University of Milan, Via Conservatorio, 7, 20122 Milan, Italy
e-mail: [email protected]

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and influenced current research frameworks (Bird and Stevens 2003). Previous
studies have shown that the traditional conception of larger firms being the leaders in
innovation and internationalisation has become outdated when taking into account the
increasing share of smaller firms (Acs and Audretsch 1990; Audretsch 2002).
Previous research has revealed that bigger firms are often locked in their
organizational routines (Abernathy and Thushman 1978; Anderson and Thushman
1990) and bureaucratic constraints (Link and Bozeman 1991) that produce inertia
regarding the undertaking approach of innovative activities (Scherer 1991). Whereas,
smaller firms with fewer routines and less bureaucratic resistance have the ability to
adapt to environmental changes more easily which makes them more prone to provide
innovations compared to their larger counterparts (Foster 1986; Christensen and
Rosenbloom 1995; Scherer 1991; Tether 1998). In the recent years, we have also
witnessed an increasing presence of small firms on the international scene as a result
of their ability to respond to market forces more rapidly thanks to their flexibility
(Miesenbock 1988). The advent of the rapid internationalisation phenomenon (Oviatt
and McDougall 1994) has, furthermore, confirmed that small and medium firms
(SMEs) are able to overcome resource constraints and the liabilities of smallness,
newness and foreignness (Zahra and George 2002). In other words, SMEs are not only
able to manage situations of great complexity such as innovation and internation-
alisation, but also to interpret them efficiently despite the difficulties inherent to their
reduced dimension. Our research focuses on a specific type of SMEs, i.e. those
operating in high technology sectors. High-tech firms play a major role in
industrialized economies since they strongly contribute to economic growth and
social development (OECD 2005). However, when studying efforts related to
innovation and internationalisation, their relevance has often been neglected by
previous studies (Bernardino and Jones 2008). Buckley and Casson (1998) argued that
innovation is a crucial factor in a firm’s product mobility across national boundaries.
According to Ruzzier et al. (2006, p. 476), SMEs that operate in high technology
sectors ‘‘can not act in the marketplace without taking into account the risks and
opportunities presented by international competition’’. In these firms, innovation is
the raison d’etre and constitutes the basis for their competitive advantage not only in
the domestic market, but also in foreign markets (Jones 1999, 2001; Guan and Ma
2003). Innovation can confer competitive advantage focus on costs, via the
development of new and more efficient productive process, and/or based on
differentiation by means of product innovations, allowing firms to tailor their products
to customer requirements, or develop products of a higher quality (Lopez Rodriguez
and Garcia Rodriguez 2005). Examining, therefore, whether innovation would
increase the export intensity of high technology small and medium firms (HTSMEs)
represents a topic of secure interest not only for managers but also for policy makers
and scholars occupied with export issues.
Innovation, as in the Oslo Manual (OECD 2005), is defined as the implemen-
tation of a new or significantly improved product (good or service), process or
business function such as marketing methods and organization changes or external
relations. This description not only encompasses the entrepreneurial venture
endeavours of Schumpeterian origin (1934), but it also emphasises the fact that the
actual implementation of innovations in the form of products, services, organization

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and marketing processes derives from the enterprises sector (European Commission
2002). Moreover, the above definition underlines the importance of collaborations
with external partners within an open innovation framework, which has found
increasing consensus in business and management literature (Amara and Landry
2005; Chesbrough 2005; Lacetera 2001; Lechner and Dowling 1999; Lorenzoni and
Lipparini 1999; Nooteboom 2000; Onetti and Zucchella 2008; Onetti et al. 2010;
Powell 1990, 1998; Veugelers and Cassiman 2005). Innovation is a complex and
multidimensional phenomenon (Adams et al. 2006). A plethora of indicators has
been proposed in literature to accomplish the goal of measuring a firm’s innovative
effort. The measures of innovation proposed by ENRS (2002) distinguish between
innovation input indicators, innovation throughput indicators and innovation output
indicators. In their attempts to guide the approximation of the value of innovation,
previous studies have often reduced the issue to either single or aggregate measures
of the innovative activities that take place within firms. Yet these studies lack a
distinction between innovation input and output indicators, both internal and
external to the firms. The purpose of this research is to target this gap while
examining which type of innovation measures is the most effective in determining
the export intensity of high-tech small and medium firms (HTSMEs). For this
purpose a population of 689 Italian manufacturing firms is used as a sample. In this
research, we hope to make two important contributions to SMEs export literature.
First, by considering SMEs that operate in the high-tech sectors within the Italian
manufacturing industry, we believe to provide more useful, precise and comparable
empirical evidences to exporting scholars, policy makers and corporate managers.
Second, by disaggregating inputs and outputs measures of innovation into different
types and measuring each independently, we hope to fully capture the magnitude of
a firm’s innovative effort and evaluate its effectiveness in determining the export
intensity of high-tech SMEs.
The paper is organised as follows. In Sect. 2, we draw the theoretical elements of
the research along with the formulation of the working hypotheses. In Sect. 3, we
present the data used in this study and the methodology selected for the statistical
analysis. In Sect. 4, we summarize the main research findings and report the
discussion of the most significant empirical evidence. In Sect. 5, we outline
conclusions, limitations and possible suggestions for future research.

2 Literature review and hypothesis development

When studying the relation between export intensity, which has largely been
considered as a typical measure of the degree of internationalisation of SMEs
(Leonidou and Katsikeas 1996; Majocchi and Zucchella 2003; Ramaswamy et al.
1996; Young et al. 1989), and innovation related issues, not only the dimension of
the firm, but also the sectors and countries in which firms operate may present
marked differences and have different implications. Although, the lack of firm-level
data has hampered investigation on the topic concerning the relation between
innovation and export intensity (Wignaraja 2007), the research conducted on these
issues has reserved considerable attention to smaller firms (Lefebvre et al. 1998;

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Nassimbeni 2001; Sterlacchini 1999). However, earlier empirical studies of export

intensity in SMEs research did not specifically deal with high-tech sectors (Lefebvre
et al. 1998). Studies using Italian samples of SME (Sterlacchini 1999, 2001;
Nassimbeni 2001) estimated the effect of a number of non-R&D related indicators
of innovative activities on exports. Traditionally, export research has tended to
examine SMEs homogeneously without distinguishing among business sectors
(Sousa et al. 2008; Wheeler et al. 2008). However, Bell et al. (2003) showed that
high-tech firms tend to have different internationalisation pathways from low-tech
firms. Moreover, to fully understand aspects of export behavior of firms, the
consideration of the geopolitical, social and economical context seem to be
necessary (Wheeler et al. 2008). Previous research supported that export intensity
‘‘is strongly influenced by background variables from the local business environ-
ment’’ (Stottinger and Holzmuller 2001, p. 23).
Contrasting results on the impact of internal inputs of innovation on the export
intensity of firms have been reported in literature (Harris and Li 2009; Hirsch and
Bijaoui 1985; Ito and Pucik 1993; Kumar and Siddharthan 1994; Lefebvre et al.
1998; Lopez Rodriguez and Garcia Rodriguez 2005; Nassimbeni 2001; Roper and
Love 2002; Sterlacchini 1999; Wakelin 1998; Wignaraja 2007; Willmore 1992;
Zhao and Li 1997, among others). Hirsch and Bijaoui (1985), in their study of 111
Israeli firms, found out that internal innovation inputs have a positive and significant
effect on their export growth. Conversely, Willmore (1992) found no innovation
effect on exports of Brazilian multinational firms. Ito and Pucik (1993) also found
no evidence of the significant effect of internal innovation inputs on the export
intensity of Japanese manufacturing firms. However, they concluded that innovation
was a significant determinant of export intensity when the size indicator was
excluded from the equation. Kumar and Siddharthan (1994) considered 640 Indian
firms and concluded that internal innovation inputs were significant determinants for
technology industries. Zhao and Li (1997) used data from Chinese firms and found
that internal innovation activities were positively associated with export growth.
Kalafsky and MacPherson (2001) examined the export characteristics of US
companies in the machine tool industry and found that export intensity correlates
strongly with applied internal innovation activities. Roper and Love (2002) studied
the differences between the determinants of export intensity among the UK and
German manufacturing plants and reported that internal innovation inputs influence
export intensity. Hasan and Raturi (2003) used data for Indian manufacturing firms
and showed that the role played by internal innovation activities does have a
positive influence on the entry mode of firm, but only limited influence on the export
volume. In his study, Rasiah (2003) found that the internal innovation inputs have a
positive effect on the export intensity of electronic firms in Malaysia and Thailand.
Ozcelik and Taymar (2004) confirmed the positive effect of internal innovation
inputs on the export intensity of Turkish firms working in the manufacturing
industries. In their study, Gourlay and Seaton (2004) concluded that firm export
intensity is positively influenced by internal innovation activities. More recently,
Lopez Rodriguez and Garcia Rodriguez (2005) found that internal innovation inputs
were significant in affecting export intensity. In their study for the UK, Harris and Li
(2009) reported that internal innovation inputs play an important role for firms to

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overcome barriers to internationalisation, but they do not increase export intensity.

In studies specifically dealing with SMEs, Lefebvre et al. (1998) found no evidence
with respect to the contribution of internal innovation inputs to the export dynamics
of 101 Canadian small firms. The same results were found by Sterlacchini (1999)
and Nassimbeni (2001) on Italian samples of small firms. In line with the majority
of the studies reported above, we hypothesise that:
H1 There is a positive relationship between internal innovation inputs and export
intensity of Italian HTSMEs.
However, limitations in using only internal innovation measures to approximate
the firm’s innovative profile do exist. Previous studies suggested that the presence of
risky sunk expenditures connected to the innovative process makes the relative
activities more risky to smaller firms (Veugelers 1997). For this reason, SMEs often
do not organise a formal internal department devoted to innovation (Brouwer and
Kleinknecht 1996). As Bayona et al. (2000) noted, the complexity of technology
and its costs and uncertainty motivate firms to reach cooperative innovation
agreements. Previous research revealed that research partnerships and cooperative
agreements act as important mechanisms for firms to share costs and reduce risks
connected to innovation (Veugelers and Cassiman 2005). After all, innovation is not
possible in isolation (Lachenmaier and Wossmann 2006). The ability to exploit
collaboration has frequently been reflected in previous studies by means of a scale
that comprises the various forms of innovative co-operations with universities, firms
and other organizations (e.g. Lefebvre et al. 1998; Nassimbeni 2001). However,
insufficient attention has been paid to the role that different forms of cooperation
with external innovation partners play for the success of small firms in international
markets (Guan and Ma 2003; Nassimbeni 2001). The collaboration with universities
should provide a means of developing technological knowledge (Lee et al. 2001)
and opportunities for growth due to their increasing commercialization effort to
exploit academic knowledge and generate revenues (Shane and Stuart 2002;
Grimaldi 2005). However, empirical findings reported that the cooperation and
knowledge exchange between high-tech firms, the small ones in particular, and
universities remains underdeveloped (European Commission 2002). Strategic
collaborations with other companies and/or organizations should assist firms with
complementary resources (Cohen and Levinthal 1990). According to Gulati et al.
(2000), firm alliances and strategic networks potentially provide a firm with access
to information, resources, markets and technologies. Technology-based firms
generally seek technical, managerial and financial resources through alliances so as
to enhance legitimacy and increase the chance of harvesting investments in the firms
(Lee et al. 2001). Stuart et al. (2007) positioned high-tech firms as intermediaries
along a tripartite value chain which entails upstream alliances with universities and
downstream deals with established firms. They argued that high-tech firms prefer
vertical collaborations, rather than horizontal linkages among firms engaged in
similar activities in order to exploit complementary assets in terms of expertises in
different fields of knowledge from their own. Generally, collaborations have been
considered particularly important, not only for their role in helping to overcome
resource constraints providing additional competences (Mort and Weerawardena

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2006), but also in term of additional information enabling identification of new

market trends and exploitation of entrepreneurial opportunities (Dimitratos and
Jones 2005). For international firms, collaborations represented the principal source
of external physical, organisation, technical and reputation resources (Chetty and
Wilson 2003). According to Lu and Beamish (2001), alliances and cooperative
agreements can improve the international performance of small firms by providing
resources and mitigating the uncertainty of the internationalisation process.
Empirical evidence in export literature, to which this study belongs, reveals that
collaborations with external partners is quite common among high-tech companies
as it enables firms to accelerate their international growth (Coviello and Munro
1997; Keeble et al. 1998). Hence, we hypothesise that:
H2 There is a positive relationship between external innovation inputs and export
intensity of Italian HTSMEs.
Partnerships and inter-organizational collaborations usually act as a source of
information for innovation (Amara and Landry 2005) and as an active integration
mechanism of knowledge (Sobrero 2000), since innovation increasingly derives
from networking interactions (Veugelers and Cassiman 2005). Firms are linked to a
diversified set of agents through networks of collaboration and exchange of
information. This represents a system of open innovation where intense interactions
between firms and external sources of information increase the benefits in terms of
new knowledge and knowledge sharing (Chesbrough 2005; Lorenzoni and Lipparini
1999; Lundvall 1993; Nooteboom 2000; Powel 1990, 1998; Rothwell 1992). This
helps to reduce uncertainty in innovation processes, time frame, knowledge gaps
and financial constrains of the firms (Pyka and Kuppers 2002). Basile (2001) argued
that small firms innovate through acquiring knowledge embodied in external
sources and external collaborations. However, the presence of internal innovation
abilities remains essential to optimize the benefits from external cooperation
(Veugelers and Cassiman 2005). Besides those internal and external innovation
inputs, some authors argued that innovative inputs only weakly represent the
amount of innovative activity actually realized at firm level (Van Dijk 2002;
Lachenmaier and Wossmann 2006). Other authors (Lefebvre et al. 1998; Lopez
Rodriguez and Garcia Rodriguez 2005) suggested to take into account innovation
outputs in order to avoid reflecting only a partial aspect of the innovative profile of
the firms. Empirical evidence has shown that accounting standards lack the ability to
accurately reflect innovative activities of firms when these are related to innovative
inputs (Canibano et al. 2000). Hoffman et al. (1998) invited researchers to study
both innovative inputs and innovative outputs in order to fully capture the amount
derived from their innovative effort. Previous research using both large and small
firms’ samples (Basile 2001; Ozcelik and Taymar 2004; Lopez Rodriguez and
Garcia Rodriguez 2005; Sterlacchini 2001; Roper and Love 2002) found that
innovation outputs are significant determinants of the export intensity. In line with
previous research, we hypothesise that:
H3 There is a positive relationship between innovation outputs and export
intensity of Italian HTSMEs.

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3 Data and methodology

3.1 The sample

The present study is based on secondary data of Italian firms operating in the
manufacturing industry collected through a National Survey carried out by the
research department of Capitalia (now Unicredit) at the end of 2003. The database
accounted 3,452 observations with a large set of variables including both
questionnaire data and balance sheet information. A more detailed description of
the dataset is provided in the appendix. Moving from the original dataset and
following the EU Recommendation (2003), we selected SMEs only according to
their number of employees ([10 and \250) and total turnover (\50 million euro).
The decision to concentrate on SMEs resides in the fact that they represent almost
99% of all enterprises in the EU, providing around 100 million jobs or 67% of the
total employment in Europe (European Commission 2003a, b). Italy is the European
country with the greatest number of SMEs per inhabitants (65 SMEs per 1,000
inhabitants). Thus, the relative importance of SMEs for the Italian economy exceeds
by far the EU average (Eurostat 2008). Having restricted our unit of analysis to
small firms only, we used the classification adopted by EU Commission (European
Commission 2002) to further reduce our unit of analysis to small firms operating in
the high technology sectors. Although, a broadly accepted definition for high-tech
SMEs does not exist in literature, the use of an EU classification should allow
comparison with other studies on high-tech SMEs from other European countries.
This approach is in line with Storey and Tether’s (1998) recommendation.
However, when applying the two digit statistical classification of economic
activities provided by the EU Commission (Table 1), ‘Computers and related
activities’ and ‘Research and Development’ are considered service activities. Data
collected in the Capitalia Survey did not report information about the service
activities. In accordance with previous scholars (Bernardino and Jones 2008), we
concentrated the analysis on the remaining six high-tech sectors which belong to the
manufacturing industry. For our empirical analysis, the adjustments described above
lead us to have 2,749 small firms, of which 689 belong to the high-tech sectors.

3.2 The dependent variable

Exporting is the most common entry strategy adopted by SMEs to internationalise

their activity (Wolff and Pett 2000). According to Zucchella et al. (2007), three
dimensions of export are reported in the literature. The first dimension measures the
geographic scope of the exporting activities in terms of number of countries to
which the firm exports. Another measure is represented by the precocity and speed
of foreign sales. The third dimension, defined export intensity, is represented by the
ratio/percentage of export sales over total sales. Leonidou et al. (2002) identified
that export proportion of sales, export sales growth, export profit level, export sales
volume, export market share, and export profit contribution were the most used
measures of export intensity. According to Katsikeas et al. (2000), none of the
individual measures of export can be considered inherently superior to others.

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Table 1 EU high technology

Nace code Description
statistical classification
of economic activities
24 Manufacture of chemicals, chemical products
and man-made fibres
29 Manufacture of machinery and equipment
30 Manufacture of office machine and computers
31 Manufacture of electrical machinery
32 Manufacture of radio, television
and communication equipment
33 Manufacture of medical, precision and optical
instruments
Source: European Commission
(2002) ‘High technology SMEs 72 Computers and related activities
in Europe’, Observatory of 73 Research and development
European SME’s, No.6

However, it has often been argued that the percentage of export sales to total sales
better represents the performance of SME which extended their business activities
internationally (Cavusgil 1980; Ramaswamy et al. 1996). This measure has also
been applied in recent studies performed in Italy (Majocchi et al. 2005). Recent
figures released by the Eurobarometer (2007) showed a low performance of Italian
SMEs on exporting sales. This underperformance justifies our interest in the use of
the percentage of export sales to total sales (EXP INT) as the dependent variable to
investigate.

3.3 Independent variables

Measuring innovation is a complex operation because of its multi-dimensional

nature (Adams et al. 2006). Not commonly agreed measures exist representing
exhaustively all the manifestation of innovation. The measures of innovation
proposed by ENRS (2002) distinguish between innovation input indicators (e.g.
R&D expenditure, R&D personnel, etc.), innovation throughput indicators (e.g.
Patents, Trademarks, etc.) and innovation output indicators (e.g. number of
innovation, type of innovation, turnover attributable to innovation, etc.). The
majority of these indicators have been used in this study for the purpose of
distinguishing input and output innovation measures, internal and external to the
firms.

3.3.1 Measures of innovation inputs

In line with previous studies, we used the total R&D internal expenditure to total
sales (R&D INT) and the R&D employees to total employees (R&D EMP) as
proxies to measure the inputs in the firms’ innovative process. However, Adams
et al. (2006, p. 26) state: ‘‘R&D is only one of several inputs into the innovation
process’’. The role of the external R&D partnership and inter-organizational
collaboration is considerably important to measure the firm’s innovative effort
(Nassimbeni 2001). In our analysis, we considered several measures to represent a

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Table 2 Variables included in the analysis

Variables Description

Dependent
Export intensity (EXP INT) Percentage of export sales to total sales in 2003
Independent
Internal R&D expenditure Percentage of internal R&D expenditure to total sales in 2001
(R&D INT)
R&D employees (R&D EMP) Percentage of R&D employees to total employees in 2001
External R&D expenditure Percentage of external R&D expenditure to total sales in 2001
(R&D EXT)
Sub-groups of external Percentage of external R&D expenditure to total sales
R&D expenditure: by three sub-groups during the period 2001/03:
University R&D Universities
Other companies R&D Other companies
Other organizations R&D Other organizations
Type of innovations: Type of innovations realized during the period 2001/03:
Product (PROD) Dichotomous variable taking the value 1 if firm innovates in products
Process (PROC) Dichotomous variable taking the value 1 if firm innovates in process
Turnover derived from for Percentage of turnover derived from innovations during
innovations (TURINNO) the period 2001/03
Control
Size (EMP) Number of employees in 2001
Business experience (AGE) Years since founding
Home country location Three dummy variables for the four locations in Italy: N. West;
N. East; Centre and South & Islands
High-tech sectors Five dummy variables for the six high-tech sectors in Table 1

diversified set of agents through which R&D collaborations occur. We used a

measure (R&D EXT) that looks at the total R&D external expenditure to total sales.
Moreover, we also employed external R&D by three sub-groups of R&D partners
(‘Universities R&D’, ‘Other companies R&D’ and ‘Other organizations R&D’) as
percentage of sales. Table 2 summarizes the variables included in the empirical
analysis.

3.3.2 Measures of innovation outputs

Besides those internal and external R&D input measures, other innovation measures
must be taken into account in order to avoid coverage of only a partial aspect of the
innovative profile of the firms (Lefebvre et al. 1998; Lopez Rodriguez and Garcia
Rodriguez 2005). With this in mind, we also included two measures of innovation
outputs: one variable measuring whether the firms have undertaken product
innovations (PROD) and another measuring whether the firms have undertaken
process innovations (PROC). Previous research (Basile 2001; Ozcelik and Taymar
2004; Lopez Rodrıguez and Garcıa Rodrıguez 2005) found that both product and/or

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process innovations are significant determinants of the export intensity. Furthermore,

we considered another variable reflecting the output side of the innovation process
such as the percentage of turnover derived from a firm’s innovative activities
(TURINNO). We believe that this variable will allow us to widen the range of
measures of innovation outputs employed in previous studies. We also believe it will
help to capture not only the magnitude of the technological profile (Lopez Rodrıguez
and Garcıa Rodrıguez 2005) of Italian high-tech SMEs, but also the amount derived
from firms’ innovative effort and its relative effect on their export intensity.

3.3.3 Control variables

The innovative profile of firms and their R&D resource capacity can be related to
firms’ characteristics. Following Lopez Rodriguez and Garcia Rodriguez (2005), we
included four control variables that previous research has demonstrated can affect
the firm’s export intensity. Such variables are: firm size, firm age, home location
industrial environment and economic sectors. The first two variables are internal to
the firms. Although progress has been made in understanding the effect of a firm’s
internal resources on export intensity, knowledge of the internal determinants is still
contradictory (Pla-Barber and Alegre 2007). The most contradictory results in the
literature have been reported for the analysis of the relationship between firm size
and export intensity. According to Zou and Stan (1998), empirical findings have
produced mixed results detecting several inconsistencies in the current knowledge
base. Some scholars report a positive relationship between the two variables
(Dhanaraj and Beamish 2003; Majocchi et al. 2005; Reid 1982; Wagner 1995),
while others report a negative relationship (Wolff and Pett 2000). Some authors
found no relationship (Bonaccorsi 1992) or a medium positive effect (Chetty and
Hamilton 1993). According to Baldauf et al. (2000) these inconsistencies may be
grounded in the use of non-uniform measures. Zou and Stan (1998) stated that the
most common hypothesis is a positive relationship, based on the Reid’s concept
(1982) of size advantage. However, Kaynak and Kuan (1993) found out that when
size is measured by number of employees negative effects especially on export
profit are more frequent. This negative effect has been well explained by Harris and
Li (2009) who argued that as firms grow bigger they may prefer an alternative
foreign entry mode such as FDI because more convenient than export. In line with
other studies (Dhanaraj and Beamish 2003; Mittelstaedt et al. 2003), the number of
total employees (EMP) as a proxy for the firm size will be used in our research in
order to control the effects of firm’s size on the export intensity of high-tech SMEs.
The relationship between firms’ age and export intensity has also been studied
widely in recent years. Firm’s age, expressed as number of years in business, has
been previously used as a proxy of business experience in other internationalisation
studies (Chen and Martin 2001; Majocchi et al. 2005). Some research has shown
that experience is a key factor in international development, reporting a positive and
robust relationship (Majocchi et al. 2005); other studies considered experience an
unimportant variable for internationalisation (Oviatt and McDougall 1994). Zou and
Stan (1998) stated that, among others, firm’s age, expressed as number of years in
business, have only limited explanatory power in explaining export intensity and the

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relationship between a firm’s age had either a negative effect (Zou and Stan 1998;
Baldauf et al. 2000; Brouthers and Nakos 2005; Sousa et al. 2008) or an
insignificant effect. In this study we include a variable to control for firm’s age,
defined as the number of years since foundation (AGE). Where the company is
placed and its surrounding industrial environments have been scarcely investigated
in previous research (Aaby and Slater 1989; Zou and Stan 1998). Miesenbock
(1988, p. 44) stated that ‘‘the home country of the firm also determines the
performed export behaviour’’. Infrastructures, legal systems and government
support are all measures of the domestic geographic environment (Leonidou and
Katsikeas 1996). According to Dunning (1997), the location advantage which
includes knowledge-based assets, infrastructure and technology, shapes the firms
competitiveness. Robertson and Chetty (2000) suggested that firms generally
perform better when they face a benign domestic environment. Differences about
the North, Centre and South of Italy have been reported in terms of infrastructure
endowments, public expenditures, corruption and economic growth (Del Monte and
Papagni 2003). Hence, we decided to control for the home country location effect
introducing three dummy variables (see Table 2). Finally, we included five dummy
variables for the six high-tech sectors discussed above. Previous studies revealed
that the intensity of export activities may vary considerably across industries
(Cavusgil and Zou 1994; Harris and Li 2009) and that firms in more complex and
technologically oriented industries may have a better export intensity (Zou and Stan
1998). However, as noted by Basile (2001), studies at industry level abstract the
variations among firms. Within the high-tech industry there are different sectors
with different type of firms which might have different export intensity. We
controlled for the ‘firm’s sector effect’ on the export intensity.

3.4 Descriptive statistics

Tables 3 and 4 show the sectoral and geographical breakdown of the sample of
firms together with the average export intensity. These data give a preliminary
indication of the extent of exporting among high-tech SMEs in Italian manufac-
turing industry.
In particular, Table 3 shows that Italian high-tech SMEs have an higher
propensity towards exporting (84.2% in average) except those operating in the
‘office machines and computers’ sector (33.3%). Data show that high-tech SMEs
operating in the ‘machinery and equipment’ sector, which are the most frequent in
our sample (52%), also present the highest export propensity (89.4%) followed by
firms operating in ‘electrical machinery’ and ‘medical, precision and optical
instruments’ sectors, which respectively reported 88.2 and 77.1%. The Chi-squared
statistics (p \ .001) shows evidence of a relationship between the export propensity
and sectors high-tech firms belong to Table 3 also shows differences in export
intensity between the different groups of high-tech SMEs. The Levene’s test for the
homogeneity of variance was statistically significant (p \ 0.05), therefore after
having rejected the null hypothesis of equal variances, we run the Welsh and Brown-
Forsythe’s tests which were both statistically significant (p \ 0.01). Therefore, we
could reject the null hypothesis that the mean values of export intensity are equal for

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Table 3 The sectoral distribution of the sample of firms

Sectors Firms that have Firms that Total Firms that
not exported have exported have exported
Export intensity
(Average)

Manufacture of chemicals, 32 108 140 34.37

chemical products and fibres (22.9%) (77.1%) (100%)
(29.4%) (18.6%) (20.3%)
Manufacture of machinery 38 320 358 49.76
and equipment (10.6%) (89.4) (100%)
(34.9%) (55.2%) (52%)
Manufacture of office machines 4 2 6 37.50
and computers (66.7) (33.3) (100%)
(3.7%) (0.3%) (0.9%)
Manufacture of electrical 11 82 93 43.18
machinery (11.8) (88.2) (100%)
(10.1%) (14.1%) (13.5%)
Manufacture of radio, television 13 31 44 30.10
and communication equipments (29.5) (70.5) (100%)
(11.9%) (5.3%) (6.4%)
Manufacture of medical, precision 11 37 48 50.18
and optical instruments (22.9) (77.1) (100%)
(10.1%) (6.4%) (7%)
Total 109 580 689 44.9
(15.8%) (84.2%) (100%)
(100%) (100%) (100%)

the six groups of high-tech firms in our sample. The Tamhane’s post-hoc test
showed that the statistically significant differences (p \ 0.01) between the six
groups of high-tech firms for our dependent variable (export intensity) hold only for
firms in the ‘chemicals, chemical products and fibres’, ‘medical, precision and
optical instruments’, ‘machinery and equipment’, ‘radio, television and communi-
cation equipments’ sectors. Therefore, we can safely conclude at 95% confidence
level that the export intensity of firms operating in the ‘medical, precision and
optical instruments’ (50.18) and ‘machinery and equipment’ (49.76) sectors is
greater than that of firms in the ‘chemicals, chemical products and fibres’ (34.37)
and ‘radio, television and communication equipments’ (30.10) sectors.
Table 4 shows that high-tech SMEs located in the North West of Italy, which are
the most frequent in our sample (44.4%), also present the highest export propensity
(87.9%) followed by firms located in the North East of Italy (85.8%). The Chi-
squared statistics (p \ .001) showed evidence of a relationship between the
propensity of exporting and the geographic location of high-tech SMEs. Table 4
also shows differences in export intensity between the high-tech SMEs located in
the different geographical areas. The Levene’s test for the homogeneity of variance

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Innovation and export performance 405

Table 4 The geographical distribution of the sample of firms

Geographical areas Firms that have Firms that Total Firms that
not exported have exported have exported
Export intensity
(Average)

North West 37 269 306 44.70

(12.1%) (87.9%) (100%)
(33.9%) (46.4%) (44.4%)
North East 35 212 247 48.37
(14.2%) (85.8%) (100%)
(32.1%) (36.6%) (35.8%)
Centre 21 55 76 39.58
(27.6%) (72.4%) (100%)
(19.3%) (9.5%) (11.0%)
South and Islands 16 44 60 35.97
(26.7%) (73.3%) (100%)
(14.7%) (7.6%) (8.7%)
Total 109 580 689 44.9
(15.8%) (84.2%) (100%)
(100%) (100%) (100%)

was not statistically significant (p [ 0.05), therefore we failed to reject the null
hypothesis of equal variances. The F-statistics (3.567) in the ANOVA test was
statistically significant (p \ 0.05), therefore differences in the export intensity
between high-tech SMEs located in different areas exist. However, the difference
was statistically significant only for firms located in the North East part of Italy
(44.70) and those located in the South and Islands (35.97). We can conclude at 95%
confidence level that high-tech SMEs located in the North East part of Italy have an
higher export intensity than those located in the South and Islands.
Table 5 shows that 90% of high-tech SMEs that have undertaken product
innovations exports compared to 77% of high-tech SMEs that did not undertake
product innovations. More than 57% of high-tech exporting SMEs have undertaken
product innovations. The Chi-squared statistics (p \ .001) suggested that high-tech
SMEs that have undertaken product innovations have an higher export propensity.
Table 5 also shows differences in export intensity between the two groups of high-tech
SMEs. The Levene’s test for the homogeneity of variance was not statistically
significant (p [ 0.05), therefore we could not reject the null hypothesis of equal
variances for the two independent samples. The consequent Student’s t test for equal
variances was statistically significant (p \ 0.05). Therefore, we can conclude at 95%
confidence level that high-tech SMEs occupied with product innovations have an higher
level of export intensity (47.87 in average) suggesting that a positive relationship
between the export intensity and undertaking product innovations does exist.
Table 6 shows that 76.5% of high-tech SMEs occupied with process innovations
export, whereas 85.4% of high-tech SMEs that did not undertake process

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406 A. D’Angelo

Table 5 Product innovation distribution of the sample of firms

Product innovation Firms that have Firms that Total Firms that
not exported have exported have exported
Export intensity
(Average)

Firms that have undertaken 36 332 368 47.87

product innovations (9.8%) (90.2%) (100%)
(33%) (57.2%) (53.4%)
Firms that have not undertaken 73 248 321 40.91
product innovations (22.7%) (77.3%) (100%)
(67.0%) (42.8%) (46.6%)
Total 109 580 689 44.9
(15.8%) (84.2%) (100%)
(100%) (100%) (100%)

Table 6 Process innovation distribution of the sample of firms

Process innovation Firms that have Firms that Total Firms that
not exported have exported have exported
Export intensity
(Average)

Firms that have undertaken 23 75 98 41.36

process innovations (23.5%) (76.5%) (100%)
(21.1%) (12.9%) (14.2%)
Firms that have not undertaken 86 505 591 45.42
process innovations (14.6%) (85.4%) (100%)
(78.9%) (87.1%) (85.8%)
Total 109 580 689 44.9
(15.8%) (84.2%) (100%)
(100%) (100%) (100%)

innovations export. More than 87% of high-tech exporting SMEs have not
undertaken process innovations. The Chi-squared statistics (p \ .025) suggested
evidence of a negative relationship between the propensity of exporting and
undertaking process innovations. Table 6 also shows differences in export intensity
between the two groups of high-tech SMEs. The Levene’s test for the homogeneity
of variance was not statistically significant (p [ 0.05); therefore, we could not reject
the null hypothesis of equal variances for the two independent samples. The
consequent Student’s t test for equal variance was not statistically significant
(p [ 0.05). Therefore, although raw data shows that high-tech SMEs that did not
undertake process innovations seem to have an higher level of export intensity, a
negative relationship between the export intensity and undertaking process
innovations can not be assumed at 95% confidence level.

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Innovation and export performance 407

To recap, the descriptive statistics discussed above show that sectors and
geographical locations in which high-tech SMEs operate are important aspects
influencing their export behavior (Stottinger and Holzmuller 2001). Moreover,
having undertaken product innovations rather than process innovations seem to
positively influence the extent of exporting (propensity and intensity) among high-
tech SMEs in Italian manufacturing industry.

3.5 Methodology

Our research focuses on examining whether innovation would increase the export
intensity of high technology small and medium firms (HTSMEs). To study the
relation between innovation and export intensity, methodological problems may
arise due to the contemporaneous effect of innovation and export. Two main trade
and economic growth theories exist to explain the relationship between innovation
and export. The first approach, which goes back to the technology-gap theory
(Posner 1961) and the life-cycle approach (Vernon 1966), sustains the innovation-
led exports argument which claims that innovating firms have incentives to expand
their activities into other markets so they can earn higher returns from their
investments (Teece 1996). In this context, the direction of causality runs from
undertaking innovation activities to internationalisation (Harris and Li 2009). The
second approach is anchored in international growth models and recognizes the
learn by exporting effect (Aghion and Howitt 1998; Alvarez and Lopez 2005;
Grossman and Helpman 1991). This effect stresses the endogenous nature of
innovation; i.e. innovation is not the cause, but the effect of the internationalisation
process (Harris and Li 2009; Lachenmaier and Wossmann 2006). Exporting should
allow firms to acquire new and diverse knowledge from acting in foreign markets
(Lachenmaier and Wossmann 2006). In other words, exporting firms enhance their
competency base through the learning process occurring when dealing with
international markets. Taking advantage of these factors, they can foster innovation
within firms (Harris and Li 2009). In this context, the direction of causality runs
from internationalisation to undertaking innovation activities. As already said, from
a methodological perspective, the mutual causation of innovation and exports
represents an important issue predicted by trade and economic growth theories
which may raise problems for empirical analysis (Lachenmaier and Wossmann
2006). However, Nassimbeni (2001) noted that a bi-directional relationship exists
not only between the measures of innovation and export, but also between the firm’s
export intensity and other firm’s characteristics. Therefore, he concluded that ‘‘given
the twofold valence of many of the factors which can be hypothesised to be both a
cause and an effect of the export choice, the model [to] verify is not a causal model,
that is, it does not explain the export (intensity) of small units. It simply identifies
which factors best characterise their export activity’’ (Nassimbeni 2001, p. 249).
This is in line with our research aim of examining which type of innovation
measures is the most effective in determining the export intensity of high-tech
SMEs. In order to deal with the problems of causality due to the possible
endogenous nature of the variables, the use of lagged rather than contemporaneous
variables represents a strategy that allows to alleviate the possibility that

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independent variables and the dependent variable are jointly determined (Spanos
et al. 2004). The data collected through the Capitalia Survey (2003) allowed us to
measure the independent variables concerning the firm’s innovation effort with a lag
time period of 3 years compared to our target variable. More precisely, the
dependent variable (export intensity) is considered at the end of 2003, whereas the
independent variables are taken at the end of 2001.1 Recent studies on export
intensity (Lopez Rodriguez and Garcia Rodriguez 2005) applied this approach in
order to overcome the causal effect problem. However, the data allowed them to
apply only a one year lag time period. The data Capitalia (2003) provided us with
more information which made possible the use of a lag time period of 3 years, in
line with the OECD (2005) suggestion which recommends to take into account a 3
years period since innovation is a path dependent process which may take some time
to manifest its effects on the firms’ activities. This should allow us to realize a more
realistic analysis of the influence of innovation measures on the export intensity of
high-tech SMEs.

4 Empirical analysis and results

Before conducting our empirical investigation, we handled missing data by

employing the expectation–maximization (EM) approach. According to Little and
Rubin (1987), when data are not missing completely at random, mean estimates
from the EM (expectation–maximization) method are unbiased and closest to the
parameter values. Therefore, mean estimates from the EM represent the best option
for estimating missing values.
A correlation matrix for all the continuous independent variables and our
dependent variable is presented in Table 7. Results show several positive and
statistically significant correlations between export intensity of HTSMEs and some
of the determinants chosen for our regression model. Data also reveal a positive
correlation between the internal and external innovation input measures as well as
correlations between the input and output measures. Given that correlations between
predictor variables could lead to unreliable regression estimates (Hair et al. 2006),
examining the significance of correlation coefficients allows checking for multi-
collinearity problems. The Table 7 shows that the correlations are quite low, thereby
suggesting that multicollinearity is not a problem. Other diagnostic tests for
multicollinearity such as the Tolerance test and the Variance Inflation Factor have
been executed and no multicollinearity problems were found. To model the relative
contribution of innovation measures to export intensity of Italian of high-tech SMEs
(HTSMEs), we relied on Tobit regression. This type of regression was chosen in
preference to the more common linear regression techniques (OLS) because of the
nature of our dependent variable. It is a percentage variable (percentage of export
over total sales), whose minimum value is 1 and whose maximum is 100, or 100%

1
The data from the Capitalia Survey (2003) did not allow us to prove the opposite direction, i.e. whether
internationalisation [export] causes innovation as we did not have data for firms exports in the period
2001–2003, but only for 2003.

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 Table 7 Correlations matrix (580 HTSMEs)
Variables Mean SD 1 2 3 4 5 6 7 8 9 10
Innovation and export performance

1. EXPINT 44.90 26.88 1

2. R&D INT .022 .028 -.055 1
3. R&D EMP .060 .082 .047* .164* 1
4. R&D EXT .004 .010 -.060 .395** .051 1
5. University R&D .001 .004 .022 .198** .139** .559** 1
6. Other companies R&D .002 .007 -.062 .235** .000 .611** .094* 1
7. Other organizations R&D .009 .002 -.024 .307** -.020 .365** .074 .043 1
8. TURINNO 12.43 17.96 .096* .052 .186** -.007 -.027 .038 -.043 1
9. EMP 62.64 44.36 .220** -.203** -.077 -.147** -.025 -.105* -.146** .025 1
10. AGE 27.35 17.03 .013 -.048 .003 .028 -.022 .072 -.068 -.006 .103* 1

Note 1 * p \ 0.05; ** p \ 0.01 (two-tailed test)

409

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410 A. D’Angelo

of sales. As previously noted, in our sample out of the 689 HTSMEs, 580 (84.2%)
were exporters, while 109 (15.8%) were non-exporters. We can observe how,
considering only exporting companies in the sample, all the values of our dependent
variable are all non-zero. Moreover, the variable has a right censored point because
its maximum value cannot exceed 100%. So, OLS assumptions of linearity and
normality may be violated and, therefore its estimations would thus give rise to
biased and inconsistent estimates (Maddala 1983). One of the main problems in
estimating the determinants of our dependent variable is that there may be
selectivity bias if we would have included only firms with positive exports.
However, the Tobit model enables us to include also those firms with zero exports.
This allowed us to accommodate censoring in the dependent variable and to
overcome the bias associated with assuming a linear functional form in the presence
of such censoring. Moreover, the Tobit model enables us to analyse both the
decision whether or not to export, and the level of export, in a single model
(Nassimbeni 2001). The Tobit model is expressed by the following equation:
Yt ¼ xt b þ ut [ 0
¼ 0 if xt b þ ut  0 t ¼ 1; 2; . . .. . .N
where N is the number of observations, Yt is the dependent variable, xt is a vector of
independent variables, b is a vector of unknown coefficients, and ut is an
independently distributed error term assumed to be normal with zero mean and
constant variance. Thus, the model assumes that there is an underlying, stochastic
index equal to xtb ? ut which is observed only when it is positive, and hence
qualifies as an unobserved, latent variable.
Table 8 reports the results of various Tobit regression models identifying the
factors that explain export intensity of HTSMEs. For all the models, the likelihood
ratio statistic (LR chi2) tests that at least one of the regression coefficient is not
equal to zero. The p-value associated is \0.0001 in all of them. So the specified
models are statistically correct and we can assume validity of results. The various
pseudo R2 reported in Table 8 evaluate the goodness-of-fit of our models. Several
pseudo R2 measures exist. A detailed discussion on these measures is offered in
Maddala (1983, p. 38–41). In the first model we included only control variables to
have a benchmark against which to test the effects of input and output innovation
measures. The pseudo R2 (16.8%) in model 1 is considered acceptable for a cross
section model (Wignaraja 2007). Of the ten control variables, seven are significant
(mostly at the 1% level). In the second model we added the two internal innovation
measures. The pseudo R2 (19%) in model 2 is higher than that in model 1 and the
likelihood ratio statistic (LR chi2) remains significant at the 1% level. Model 2
seems to explain the variation in export performance of HTSMEs better than model
1. On the basis of our model 2, we only found partial evidence to support a positive
relationship between internal innovation measures and export intensity of HTSMEs
(hypothesis 1). We did not find evidence to support a positive relationship between
R&D internal expenditure and export intensity of HTSMEs in our sample. However,
we found that R&D employees positively and significantly impact on the export
intensity of HTSMEs. Investing in R&D employees represents the R&D orientation

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 Table 8 Estimated Tobit models (dependent variable = Exp Int)
Variables Model 1 Model 2 Model 3a Model 3b Model 4a Model 4b

Intercept 31.816 (3.457)*** 35.859 (144.712) 43.139 (144.827) 43.127 (145.096) 27.228 (3.742)*** 29.869 (3.533)***
Control
EMP .215 (.028)*** .190 (.028)*** .188 (.028)*** .187 (.028)*** .203 (.027)*** .213 (.027)***
AGE .012 (.074) .006 (.073) .004 (.073) -.004 (.073) .006 (.073) .010 (.074)
N. West vs. N. East -1.205 (2.754) -1.395 (2.711) -1.344 (2.711) -1.186 (2.723) -1.444 (2.727) -1.306 (2.741)
N. West vs. Centre -13.732 (4.164)*** -13.244 (4.112)*** -12.914 (4.124)*** -13.043 (4.124)*** -12.909 (4.124)*** -13.741 (4.146)***
Innovation and export performance

N. West vs. South and Islands -11.903 (4.654)** -9.314 (4.616)** -9.350 (4.615)** -9.355 (4.614)** -10.184 (4.623)** -11.303 (4.639)**
29_vs._24 -17.08274 (3.270)*** -17.811 (3.229)*** -17.697 (3.228)*** -17.734 (3.230)*** -16.308 (3.239)*** -16.396 (3.266)***
29_vs._30 -48.88189 -52.439 -51.902 -51.466 -49.380 -47.635
(15.584)*** (15.142)*** (15.144)*** (15.226)*** (15.653)*** (15.483)***
29_vs._31 -5.360 (3.675) -4.388 (3.621) -4.379 (3.620) -4.491 (3.626) -5.371 (3.636) -5.458 (3.658)
29_vs._32 -25.075 (5.227)*** -22.948 (5.206)*** -22.782 (5.206)*** -22.930 (5.214)*** -24.466 (5.175)*** -25.236 (5.202)***
29_vs._33 -8.131 (4.897)* -7.271 (4.846)* -7.192 (4.845) -7.162 (4.852) -8.667 (4.859)* -8.378 (4.878)*
Independent
R&D INT -165.428 (37.885) -144.816 (43.559) -147.668 (44.051)
R&D EMP 45.079 (14.487)*** 50.474 (14.447)*** 49.776 (14.546)***
R&D EXT -123.574 (28.437)
University R&D 42.528 (66.928)*
Other companies R&D -143.906 (63.546)
Other organizations R&D -226.571 (448.547)
PROD 9.621 (2.720)***
PROC -.310 (3.878)
TURINNO .166 (.067)**
411

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 Table 8 continued
412

Variables Model 1 Model 2 Model 3a Model 3b Model 4a Model 4b

123
LR chi2 136.27*** 166.28*** 167.20*** 167.29*** 151.97*** 142.28***
Pseudo R2 0.168 0.190 0.191 0.191 0.185 0.176
Left censored obs 109 109 109 109 109 109
Uncensored obs 580 580 580 580 580 580
Number of firms 689 689 689 689 689 689

Note 1 Standard errors are in parentheses

Note 2 * p \ 0.10; ** p \ 0.05; *** p \ 0.01 (two-tailed test)
Note 3 North West is used as baseline for comparison as it was the most representative in our sample
Note 4 The economic activities coded as 29—Manufacture of machinery and equipment (see Table 1)—is used as baseline for comparison as it was the most representative
in our sample
A. D’Angelo
Innovation and export performance 413

of firms which has often been interpreted as an important driver to export intensity
(Hirsch and Bijaoui 1985). Our model 3a shows that R&D external expenditure does
not impact on the export intensity of HTSMEs. However, when we differentiated in
model 3b the R&D external expenditure in the three sub-groups of R&D partners
(i.e. ‘Universities R&D’, ‘Other companies R&D’ and ‘Other organizations R&D’),
our results show that the use of ‘Universities’ as external R&D partners has a
positive influence on the export intensity of HTSMEs. This result is in line with
previous research (Shane and Stuart 2002; Grimaldi 2005) which claimed that the
increasing effort of universities in commercialization of academic knowledge might
bring spill over effects to the growth opportunities of firms collaborating with the
universities. Furthermore, we argue that the prestige of universities may act as a sign
of recognition of the quality of the products offered by the firms. This may represent
an incentive for consumers to buy, at both national and international level. This also
is in line with the view that assigns to a system of open innovation the benefits in
terms of knowledge sharing, uncertainty reduction, technological complexity, time
frame and financial constrains (Amara and Landry 2005; Chesbrough 2005;
Lorenzoni and Lipparini 1999; Lundvall 1993; Nooteboom 2000; Powell 1990,
1998; Pyka and Kuppers 2002; Rothwell 1992) that allow firms to accelerate their
international growth in foreign markets (Coviello and Munro 1997; Dimitratos and
Jones 2005; Mort and Weerawardena 2006; Onetti and Zucchella 2008). On the
basis of our model 3a and 3b, we found evidence to support a positive relationship
between external R&D expenditure and export intensity of HTSMEs (hypothesis 2)
only when external R&D is carried out by universities. The fact that both internal
and external R&D sourcing have a role in predicting export intensity of HTSMEs
recalls the choice problem between internal and external R&D sourcing which is
associated with uncertainty, asset specificity, transaction costs, opportunism and
appropriability. Transaction Cost Theory (TC) provides a useful approach to
understand why firms choose to cooperate in R&D. Partnerships, cooperative
agreements and alliances represent a hybrid form of organisation (governance
structure) between hierarchical (firm) and arm’s-length transactions (market place).
As technology is specific, uncertain and tacit in nature, the risk of opportunism and
appropriability increase. This determines high transaction costs which make the
choice of hierarchical (firm based) governance structure more appropriate.
However, the internal development of technology, i.e. within the firm’s boundary,
although it reduces the transaction costs, it does not allow access to specialist know-
how available externally. Collaboration allows access to this specialised know-how,
and the reciprocity exchange of the relationships between complementary partners
should minimize the risk of opportunism. R&D cooperation between universities
and industry is characterized by high uncertainty, high information asymmetries
between partners, high transaction costs. However, since universities are not direct
competitors in the output markets of the collaborating firm, they are not able to
appropriate the benefits from the new know-how generated (Veugelers and
Cassiman 2005). This finding confirms previous research that claimed that the
collaboration with universities provides a mean of developing new technological
knowledge (Lee et al. 2001). This finding also provides support to the literature
which argues that, developing in-house R&D, firms acquire the necessary in-house

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capability to effectively exploit external know-how coming from external R&D

sources (Veugelers and Cassiman 2005). This finding does not support previous
empirical research that reported that the cooperation and knowledge exchange
between the small high-tech firms and universities is underdeveloped (European
Commission 2002). Moreover, it provides support for the literature (Stuart et al. 2007)
which positioned high-tech firms as intermediaries between upstream alliances with
universities and downstream deals with established firms. The preference for vertical
collaborations with universities, in our case, supports previous evidence that high-
tech firms are more prone to engage in dissimilar activities in order to exploit the
complementary assets in terms of different expertises, rather than the horizontal
collaborations with a similar set of knowledge. Our hypothesis 3 predicted a positive
relationship between the innovation output measures (i.e. product, process innova-
tions and the level of turnover derived from innovative activities) and small high-tech
export firms’ returns. Our models 4a and 4b seem to confirm this positive
relationships. We found that ‘Product Innovations’ is a significant determinant of
export intensity of HTSMEs. Therefore, the competitive advantages of HTSMEs
when dealing with international markets via exporting is based on product
differentiation whose technology is one of the main driver (Lopez Rodriguez and
Garcia Rodriguez 2005; Teece 1996). Thus, technology drives product innovations
and HTSMEs differentiation which has been found in international markets the area
of exploitation from which derive higher economic performance (Onetti and
Zucchella 2008). We did not find evidence to support that ‘Process Innovations’ is a
significant determinant of export intensity of HTSMEs in our sample. In model 4b, we
also found that the level of ‘Turnover derived from innovative activities’ is a
significant determinant of export intensity of HTSMEs.
As far as the control variables are concerned, firm size, home country location
and economic sectors seem to significantly affect the export intensity of exporting
HTSMEs across all the different models. The positive relationship between firm size
and the degree of internationalisation of HTSMEs measured in terms of total
turnover exported is consistent with the Reid’s concept (1982 of size advantage and
economies of scale to overcome the perception of risk in dealing with foreign
markets. Our finding is in line with the majority of the studies in the export literature
(Zou and Stan 1998). In an age of information and communication technologies,
geographic and industrial setting location should be less a constraint, especially for
exporters. However, our results show that the surrounding industrial environments
and the domestic geographic location of firms are still important determinants of
export intensity. This result confirms previous research which underlined the
importance of location assets in determining firm competitiveness (Dunning 1997;
Leonidou and Katsikeas 1996; Robertson and Chetty 2000). The existence of
differences between the North, Centre and South of Italy in the term of
infrastructure endowment, public expenditure, corruption and economic growth
(Del Monte and Papagni 2003) seem to negatively affect the export intensity of
Italian HTSMEs. With regards to the performing a specific economic activity within
the technology-intensive sectors, the results indicate that the effect is negative and
significant on the export intensity. This might suggest that some firms performing
specific economic activities might lack capacity to compete in foreign markets

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Innovation and export performance 415

although belonging to the technology-intensive sector. The intensity of exporting

activity vary considerably not only across industries (Cavusgil and Zou 1994; Harris
and Li 2009), but also across sectors and within sectors. Our result show that
differences in export intensity exist between firms performing different economic
activities within the same sector. Finally, the limited explanatory power of the
variable age in explaining export intensity of HTSMEs reported in our study is in
line with previous research which argued that experience is an unimportant variable
for internationalisation (Oviatt and McDougall 1994; Zou and Stan 1998).

5 Conclusions

In this article we have tried to examine which type of innovation measures is the
most effective in determining the export intensity of high-tech small and medium
firms (HTSMEs), using a sample of 689 Italian manufacturing firms. Drawing on the
innovation and export management literature, this study presents important
implications for SMEs export scholars, managers and policy makers. By
distinguishing among innovation input indicators both internal to the firms (such
as R&D expenditure, R&D employment) and external (R&D collaborations), as
well as innovation output indicators (types of innovation and turnover attributable to
innovation), we have tried to capture the magnitude of the firm’s innovative effort
and its effectiveness in characterising the export intensity of high-tech SMEs.
Applying a lag time period of 3 years, we have also comprehensively distinguished
innovative inputs to innovative outputs while exploring whether innovative efforts
have had a measurable effect on the export intensity of high-tech SMEs. This
allowed us to expand the traditional innovation measures used in the literature and
to provide more accurate and precise results. R&D expenses and R&D employees
are essential indicators of R&D orientation and innovation. However, no evidence is
found with respect to the contribution of internal R&D expenses to the export
intensity of our firms. Our analysis suggests that R&D employees seem to positively
and significantly impact the export intensity of HTSMEs. This underlines the
limitations in using only input measures of innovations to account for the innovative
activity realized at small firm level. The positive influence of external R&D on the
export intensity of Italian HTSMEs and, in particular, that one of ‘Universities’ as
R&D partners supports the existence of cooperation development and knowledge
exchange between the small high-tech firms and universities. The exploitation of
complementary innovation assets not only make it possible for core innovation
resources to operate effectively, but they also become relevant for achieving success
in foreign markets. Therefore, Italian HTSMEs and their managers should consider
other complementary innovation assets along with their technological resources to
enhance their export competitiveness. ‘Universities’, in our case, seem to provide
positive spill-over effects on exporting HTSMEs that present R&D orientation.
They seem to be able to absorb know-how coming from external R&D sources and
to exploit it in export markets. Policy makers should foster the cooperation between
universities and small firms operating in high-tech sectors as this may generate
higher returns for firms in terms of sales at international level. Moreover, the

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cooperation between universities and small firms could also facilitate the link between
the academic knowledge and the productive world. Many countries have launched a
variety of public promotion programmes supporting especially collaborative research
between industry and public science institutions, and we hope that the Italian
government will follow. Our analysis suggest that high technology SMEs and their
managers should direct their innovative effort towards product innovations rather than
process innovations if they want to perform in international markets. Product
innovations represent the materialization of the technological resources of high
technology SMEs which allows them to focus on product differentiation to achieve a
competitive advantage on export markets (Lopez Rodriguez and Garcia Rodriguez
2005). As for future studies in this area of research, export scholars are called to
expand the scope of this study by focussing on other measures of innovation which
may influence the internationalisation of high technology SMEs such as organiza-
tional innovations. The empirical analysis has also shown that, while the age of the
firms does not account for significant differences, the size, geographic home location
and economic sectors of the firms act as important control variables. An heterogenic
perspective has emerged when attempting to explain the influence of innovation
measures on the export intensity of HTSMEs. With regards to economic activities, our
results suggest that dissimilar firms performing diverse economic activities within the
high-tech sectors differ in terms of their export intensity questioning whether studying
SMEs heterogeneously rather than homogeneously could offer a more insight into the
firms’ dynamics. In this regard, future studies dealing with high-tech sectors should
examine firms carrying out a precise economic activity in order to achieve a deeper
understanding of their intenationalisation behaviour. At the policy level, policy
makers should pay more attention to the economic activities of the firms when they
implement public policies to foster exports. With regards to the existence of export
performance differences between firms located in the North, Centre and South of
Italy, managers should pay due attention to where they locate their investments;
whereas policy makers should focus their public interventions in reducing the gaps
that exist between the North and the South of the country not only in terms of
infrastructure endowment (Del Monte and Papagni 2003), but also in terms of
availability of high skilled human capital which can allow firms located in the South
of the country to better perform in foreign markets. Last but not least, policy makers
should implement policies to encourage firms to increase their size in order to achieve
economies of scale to overcome the perception of risk in dealing with foreign markets.
This study would not be complete without mentioning several limitations,
followed by possible avenues for future research. There are several weaknesses
concerning the results of this study that have to be stressed. First, previous studies
pointed out that the findings of research concerning the internationalisation of firms
are mainly country-specific (Lu and Beamish 2001). We are aware that the
application of EU classification (European Commission 2002) to define our sample
of HTSMEs and the use of data from the Italian manufacturing setting makes the
empirical evidence comparable at European level. However, this approach
represents a limitation as the generalizability of the findings is questionable to
other countries outside Europe. Thus, studies with comparative samples are called to
extend the generalizability of the results of this study. Second, although the use of a

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Innovation and export performance 417

lag time period of 3 years allowed us to provide more accurate results while
measuring the influence of innovation measures on the export intensity of HTSMEs,
this study has been constructed within a cross-sectional design. The Tobit regression
used it has been helpful to analyse the relationship between a single dependent
variable and several independent (predictor) variables (Hair et al. 2006). However,
it would be interesting to investigate all dependence relationships of innovation
measures along with export intensity at the same time. A structural equations
approach (SEM) would allow us to test the entire model simultaneously. SEM is a
multivariate technique suitable for estimating causal models with multiple
independent and dependent constructs, i.e. when dependent variables become
independent variables in subsequent dependence relationships (Hair et al. 2006).
Finally, the research has been limited to export intensity as the only measure of the
degree of internationalisation. It has been argued that relying only on export
intensity leaves out the multiplicity of factors connected to international expansion
of a firm. Therefore, analysis should adopt multiple indicators which are not limited
only to the internationalisation in terms of export sales. To test a model in which the
dependent variable is export propensity could represent an extension of this study.
Another idea for further research concerns the possibility of studying the
contribution of innovation towards the propensity of firms to expand internationally
by analysing the differences among entry modes: exports, inter-firm equity and non-
equity agreements and foreign direct investment.

Acknowledgments This paper has benefited from the constructive comments of participants at AIB-UK
Chapter hosted at University of Glasgow (UK) and EIBA Conference hosted at University of Valencia
(Spain). I would like to thank A. Zucchella and E. Cotta Ramusino from University of Pavia (Italy) for
their helpful recommendation and guidance. I am also grateful to A. Majocchi form the Center for
International Business & International Economy (CIBIE) at University of Pavia (Italy) for his comments
and statistical advice. The contribution of two referees significantly improved the paper. I would like to
dedicate this paper to the memory of my mentor Professor Jim Bell (1954–2009).

Appendix

The dataset Capitalia (2003) provides detailed information on: (a) general
information on activity, sector, ownership, (b) employment; (c) innovation and
investments; (d) internationalisation; (e) market and competition; (f) finance and
relationships with banks. The Table 9 provides a brief summary of the secondary
data source.
According to the Survey of manufacturing enterprises (Capitalia 2003), the
sample represents 11.3% of the total manufacturing industry in Italy. The data in
this source are based on responses to questionnaires sent every 3 years by the bank
to its clients. These responses are matched with firms’ balance sheets data available
to the bank. The direct participation of Capitalia in the collecting data makes the
dataset used in this study a very reliable source of information. Furthermore, the
joint use of both sources of information (i.e. balance sheets and surveys) allows to
overcome the methodological limitations affecting innovation studies based on only
one source of information (Canibano et al. 2000).

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418 A. D’Angelo

Table 9 Summary of the secondary data source

Title Data set Topics covered

Capitalia ‘IX Indagine Data are for the years 2001–2003 and they Data gathered through the
sulle imprese refer to Italian manufacturing firms. The questionnaire cover the
manufatturiere italiane’ original dataset counts 3,452 observations following topics:
and 1,016 variables including both (a) general information on
quantitative data, drawn from the annual activity, sector, ownership;
reports, and qualitative information
obtained through the submission of a (b) employment;
questionnaire (c) innovation and
investments;
(d) internationalisation;
(e) market and competition;
(f) finance and relationships
with banks

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Author Biography

Alfredo D’Angelo is a post-doc research fellow at the University of Milan (Italy). He completed his
Ph.D. at the University of Pavia (Italy). He also obtained an M.Sc. in Management Research at University
of Glasgow (UK), an M.Sc. in International Business at University of Ulster (UK) and a B.Sc. in
Economics at Federico II University of Naples (Italy). His research interest are focused on innovation and
internationalization topics. His works have been presented at several international conferences.

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