By Blake Jackson
A recent study has found that firms in some regions are more successful in reaching international markets due to higher innovation capacity. Researchers from Penn State examined why some areas have stronger export performance than others, identifying key factors that influence trade success.
One major factor is the presence of workers in occupations related to patent creation, often referred to as the “inventive class.” These roles, typically in science, technology, engineering, and mathematics (STEM), are critical to driving innovation and improving products and processes. Areas with a higher share of such workers tend to perform better in global trade.
Another important element is what's known as "latent innovation"—the ability of businesses to improve by applying external knowledge across different industries. This kind of innovation grows in places where there is regular exchange of ideas between different sectors. However, regions with limited industry variety often face challenges in achieving this level of innovation.
The study used data from the Annual Business Survey and the Longitudinal Firm Trade Transactions Database, examining firm characteristics, innovation activities, and export behaviors from 2017 to 2020. Results showed that regions with stronger innovation ecosystems also had higher export activity.
Lead researcher Luyi Han "Billions of dollars have been appropriated for programs that directly and indirectly seek to address the competitiveness of U.S. manufacturing. For example, the Infrastructure Investment and Jobs Act can potentially improve access to global markets by addressing transportation and broadband challenges often faced by rural businesses," said Lead researcher Luyi Han.
The study also found that immigrant-owned businesses were significantly more likely to engage in exports. "Our study reveals that innovation capacity, particularly the presence of workers in inventive occupations, explains a significant portion of the urban-rural export gap. While place-based policies focusing on enhancing rural innovation ecosystems show promise, our findings suggest the export advantage of urban areas may also stem from structural factors that aren't easily addressed through policy interventions alone," said Han.
"We found that workforce shares of inventive class and latent innovation scores are both higher in metro areas and were significantly correlated with the greater export intensity playing out in those areas," said Co-author Timothy Wojan.
These findings suggest that building strong innovation systems and inclusive workforces is key to expanding access to global trade opportunities.
Photo Credit: penn-state-college-of-ag-sciences.
Categories: Pennsylvania, Business