The Role of Innovation on Export Performance of Enterprises in Lao PDR

Abstract

     Innovation is considered a crucial element for improving efficiency, reducing costs, and increasing export competitiveness. The objective of this study is to analyze the role of innovation types in the export performance of enterprises in Lao PDR by applying multivariate and logit models. The World Bank Enterprise Survey 2024, comprising 363 enterprises, serves as the basis for this research. The results reveal that adoption of innovations has increased with the size of the firm; small firms have limited financial and technical constraints, medium firms reveal moderate and efficient adoption, while large firms have more advantages in all types of innovation because of strong competitiveness and international connections. In terms of sectoral alignment, the service sector leads in terms of firm numbers, while manufacturing firms have a stronger capability to apply product and process innovation. In contrast, trade firms tend to have the lowest levels of innovation adoption. The OLS and logit estimation results indicate that firms that apply foreign technology have export values 4.51 times higher than those that do not use it.

Additionally, firms that use both improved process innovations and foreign technology have export values that are approximately 10.65 times larger than those of firms that do not, with statistical significance at the 1% level. Precisely, the results indicate that export promotion policies should focus on specific types of innovation to improve export performance at the firm level and support long-term economic growth. This study will help us understand how different innovation types affect export performance in developing countries and will provide invaluable guidance to policymakers who want to boost export growth.