Innovation drivers for export performance

According to the research-based view of the firm, innovation is a key capability that can foster a sustainable competitive advantage and explain firm heterogeneity in export performance. However, few studies have focused on the effect of innovation on export performance in the context of low levels of innovation, which developing markets are characterized by. Since exports are considered the first market entry mode, it is critical to understand the effect of innovation on exports. In this paper, we test the effect of innovation on export performance in small and medium-sized enterprises (SMEs) in Peru that have received government innovation subsidies, with a theoretical model that incorporates innovation inputs, innovation types, and performance. We test the model using partial least squares structural equation modeling from 237 SMEs. The findings show that government innovation subsidies, human capital, and cooperation have a positive effect on innovation types. Likewise, innovation types positively affect production and export performance. Production performance mediates the relationship between innovation types and export performance. This research article advances the study of innovation and export performance in an emerging market context, which are characterized by a weak innovation system and low investments on innovation. Likewise, it holds policy implications for both science, technology and innovation policy and foreign trade policy.