E. Chalioti (Yale University), K. Drivas (AUEB), S. Kalyvitis (AUEB), M. Katsimi (AUEB and CESIfo)
Abstract: Using micro data of firm exports and international patent activity we find that Greek innovative exporters, identified by their patent filing activity, have substantially higher export revenues by selling higher quantities, rather than charging higher prices. To account for this evidence, we set up a model of vertically differentiated products. In a foreign market, the innovative exporter produces a high-quality good under monopoly rights and faces competition by non-innovative Greek exporters. We argue that, if the number of non-innovative firms is large and thus competition among them is stiff, the innovative firm will sell higher quantities in more distant markets. This prediction is empirically confirmed, suggesting that innovation coupled with patent rights and market characteristics are important determinants of firm export behavior.