The Joint Impact of Innovation and Knowledge Spillovers on Productivity and Growth for Exporting Firms

type="main" xml:id="twec12214-abs-0001"> This paper provides new insights regarding the role of innovation and localisation on the levels and growth of total factor productivity among exporting firms. For that purpose, we establish a dynamic model using data collected from nearly 10,000 Swedish exporting firms over a 12-year period. Different innovation proxies are used, and we distinguish between persistent and non-persistent innovators, while knowledge from outside the firm is measured by a newly developed methodology with detailed spatial resolution. The econometric evidence shows two distinct results. First, persistent innovators benefit significantly more than other exporters from access to a rich spectrum of nearby knowledge. Second, the level of productivity among non-innovative exporters and exporters that are only temporary engaged in innovation is positively affected by externalities in the most knowledge-intense local milieus.