Purpose - We explore the effects of public subsidies on exports while taking into account inter-firm spillover effect, focusing on the Korean renewable technology firms.
Design/Methodology/Approach - We use panel data for 99 firms over the 30-year period from 1980-2019. Considering the results of various diagnostic tests to confirm the characteristics of the data, we establish a dynamic panel vector autoregressive model in the fist differences that consider the results of the diagnostic tests, which is followed by estimation of the one-step system generalized method of moments.
Findings - We find convincing evidence of the presence of the direct and indirect (spillover) effects of firms’ knowledge on export. We also find that non-R&D subsidy does not significantly affect firms’ exports, and that R&D subsidy has a positive and significant effect on the exports. Firms’ productivity contributes to export enhancement. Learning-by-export is demonstrated, by showing that there is a dynamic path in export, meaning the export in the previous period is a source of the export in the present period.
Research Implications - We contribute to an understanding of government subsidies on firms’ exports whiling considering firms’ knowledge spillover effect, which is not tackled in the literature. We propose some policy implications based on the results of the study, along with the limitations of the study.