An Export Dividend

Entrepreneurship is widely believed to stimulate economic growth by increasing innovation and competition. But from an economic point of view, not all startups are created equal. New research shows that young exporters may provide a particularly large boost to an economy's performance.

In developed countries, high-level exporters—startups with more than 25% of their customers located in other countries—play a bigger role in stimulating growth than nonexporting businesses, according to economists Jolanda Hessels and André van Stel of economic research institute EIM and Erasmus University Rotterdam.

In transition economies, such as China and Hungary, even less active exporters do more for growth than nonexporters. The case is different for Thailand and other less developed countries, where exporting startups do not boost the overall economy. "The lack of human and financial capital in poorer countries limits the ability of entrepreneurs to produce sophisticated products demanded abroad, as well as the capacity to develop new capabilities and absorb new technology through exporting," says Hessels.

So what kind of added benefit does exporting yield to entrepreneurs and the economy at large? "It helps stimulate learning and innovation in two ways," says Hessels. First, the lure of demand abroad leads startups to adapt their products or services for foreign markets. Second, doing a significant amount of business abroad exposes entrepreneurs to new processes and technologies. Both can lead to innovations or improvements that benefit the startup and can force domestic businesses to become more competitive.

By James Mehring

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