**_<mark>(3) Connectivity to global knowledge.</mark>_** <mark>A range of activities related to participation in international markets may have beneficial impacts on firm outcomes, especially those related to international buyers/suppliers that bestow knowledge spillovers from commercial interaction (learning by exporting/importing) or firm-specific abilities to access and utilize knowledge flows and best practices via global connectivity through the internet or technology licenses. Sutton (2007) argues that developing economies benefit through the vertical transfer of capabilities from foreign to domestic firms. Gorodnichenko, Svejnar and Terrell (2010) explore whether firms that supply a larger share of sales to MNCs innovate more than firms that sell more to the domestic market, and find that these vertical relationships induce innovation by domestic firms. As part of exploring the range of vertical capability transfers between domestic and foreign firms, they also simultaneously include export and import indicator variables, as well as market competition indicator variables. We relate the following knowledge-related indicators to outcomes:</mark>

- **<mark>Access to knowledge and learning through trade</mark>** <mark>: Firms can acquire more advanced technologies and learning capabilities by exporting to technologically more advanced markets and engaging with customers in those markets, with foreign buyers often providing their local subcontractors with technology, capital equipment and training so that the latter can produce to higher specifications and standards. While the traditional evidence has been inconclusive (see Wagner 2007 for a review of the literature on exports and TFP), Kraay (2006) finds evidence that past export experience helps explain current TFP for Chinese firms, and Lederman (2009) finds that a firm's export status is positively correlated with the probability of innovating. For India based on plant-level data for over 20,000 firms over 1989-2008, Mukim (2010) finds that exporting improves firm performance, though Tabrizy and Trofimenko (2010) do not (they find that self-selection of more productive firms into exporting explains the productivity differential between exporters and non-exporters). Cheaper intermediate and capital goods imports, on the other hand, may allow firms to produce existing goods using the same inputs as before, but at lower cost. They could also open up new ways of producing existing goods, and even allow entirely new goods to be made. Acharya and Keller (2009) estimate that the contribution of international technology transfer to TFP growth exceeds that of domestic R&D and that imports are a major channel for these spillovers. Topalova and Khandelwal (2011) show a causal link between increases in the number and volume of imported inputs from abroad and increases in TFP in India, while Goldberg et al. (2010b) link access to new imported inputs and new products introduced by domestic firms in India.</mark>

- **<mark>Access to knowledge through other channels</mark>**

- **_<mark>internet use</mark>_** <mark>: firms can acquire disembodied external knowledge flows from open source information such as scientific, technical and industrial journals, informal contacts and communications through networks of specialists, trade and industry associations, and other knowledge flows accessible through the internet, via e-mail or website use.</mark>

11