Innovation Pressure from Domestic and Foreign Competitors and Firm Export Intensity in Transition Economies

We examine how innovation pressure from domestic and foreign competitors affects export intensity among transition economy firms. We argue that innovation pressure from domestic competitors leads firms to pursue horizontal differentiation, reducing exports by limiting international appeal. In contrast, innovation pressure from foreign competitors drives vertical differentiation, boosting exports through enhanced competitiveness. Using survey data from 26 transition economies, we find that firms decrease exports under innovation pressure from domestic competitors but increase them when facing innovation pressure from foreign competitors. Furthermore, the level of home-country economic development moderates these effects, strengthening both relationships.