Innovation, internationalisation and the performance of microbusinesses

Abstract

This article integrates internationalisation, and specifically exporting, into a conceptualisation of how innovation production leads to productivity performance in microbusinesses employing fewer than 10 people. Innovation production is reframed for the microbusiness context by focusing on knowledge acquisition and formalisation rather than on research and development (R&D) activity. Propensity score matching analysis is used to investigate British microbusiness survey data. It finds a causal process in which innovation promotes exporting activity. This in turn leads to improved productivity. In contrast to research on larger businesses, this study finds no direct link between innovation production and productivity. These findings are robust to various checks for potential endogeneity arising from feedback into innovation from internationalisation and from self-selection of high productivity firms into exporting.