hand, for large firms, the more innovations they develop the higher the probability of exporting. Wakelin’s interpretation is that the cost of entering foreign markets is higher for small firms, which prefer to explore domestic markets. Furthermore, innovative activities positively affected export intensity.

Another approach analyzes technological capabilities of firms, defined as the technical, managerial, and organizational skills to generate and manage technological change. Romijn (1997) affirms that innovations developed by small firms “predominantly consist of practical, shop floor-based and problem-solving [adjustments] involved in setting, running, maintaining, repairing, and making minor changes to technology in response to local conditions that are different from the circumstances under which the technology was developed.”<sup>11</sup> Wignaraja and Ikiara (1999) and Wignaraja (2001) used an index that considered various components of technological capabilities, including product and process improvements, linkages, and investment in new equipment. Using firm-level data from Kenya and Mauritius, respectively, they found a positive and significant association between this innovative index and the firm’s export performance. However, both studies are based on very small samples (around 40 firms) and use OLS estimates.

The inconsistent findings regarding innovation in the reviewed literature suggest that results have been strongly influenced by specificities of analyzed contexts (e.g., countries and sectors) and by methodologies in terms of measures and models.

# **2.4. Other Determinants**

In addition to size, industry, and technology, other variables can be relevant to explain firms’ export propensity and intensity. One example is firm’s age. It is a commonly used variable to model a firm’s export performance. The interpretation of the coefficient, however, may be unclear. It may be considered that firms seek foreign markets when expansion possibilities in the domestic market are exhausted. However, if new firms are founded on the basis of innovation, younger firms may have comparative advantages with respect to older firms to enter foreign markets. Furthermore, new firms may operate in niche markets with small domestic demands and, thus, have an exportoriented production. This fact can be illustrated by both Smith et al. (2002) and Barrios et al. (2003), who found a positive sign for the age coefficient in their models for export propensity and intensity for Danish firms and the Spanish manufacturing sector, respectively. Nevertheless, the opposite was also found in the literature. Working with Indonesian manufacturing firms, a negative coefficient for the age variable was found for export intensity and export propensity by Ramstetter (1999) and Sjoholm (2003). The explanation for this negative sign lies on the fact that old establishments founded under heavy import substitution policies focused on domestic markets and were less likely to export.

Other examples are variables that capture firms’ willingness to take risks to operate in foreign markets. Publicly listed companies with greater financial solvency and/or limited responsibility in terms of liabilities (compared with personal ownership)

> 11 See p.359.

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