The Impact of Exporting on Innovation in Service Industry

Exporting is one of the most important forms that a firm selects in internationalizing its business. Globalization and progress in information technology have made it possible for service firms to seek opportunities in the international marketplace through exporting. In this paper, we examined the impact of exporting on the production, process and organizational innovations of Korean service firms. The features of service industry that differ from manufacturing industry were expected to strengthen the relationship between exporting and innovation. A higher level of knowledge spillover and a greater tendency of knowledge sourcing from external parties may promote innovation in the process of exporting services to a foreign country. Furthermore, market and technology information acquired through exporting is expected to be incorporated into production design and function. The more successful exporting firms are more likely to improve their service-providing processes as well as their product qualities, using information about foreign customers and their needs. In this process, exporting service firms will re-create their organizational structures so that ‘learning by exporting’ may be facilitated. Based on discussions centering round these points, we hypothesized that the higher the level of export in a service firm is, the more innovation activities would be conducted in each area of innovation. Implementing logistic regressions using the 2006 Korean Innovation Survey data, we found a significantly positive association of Korean service firms’ exporting with product innovation and organizational innovation. However, our data did not support our hypothesis on the relationship between exporting and process innovation.