Exploitative learning by exporting

Decisions on entering foreign markets are among the most challenging but also potentially rewarding strategy choices managers can make. In this study, we examine the effect of export entry on the firm investment decisions in two activities associated with learning about new technologies and learning about new markets – R&D investments and marketing investments, in search of novel insights into the content and process underlying learning by exporting. We draw from organizational learning theory for predicting changes in both R&D and marketing investment patterns that accompany firm entry into exporting and link these changes to firm productivity. Our results show that marketing investments are equally likely to be triggered by exporting as R&D investments. Furthermore, our results suggest that although export entry is accompanied by increases in both R&D and marketing expenditures, it is predominantly the marketing-related investment decisions associated with starting to export that lead to increases in firm productivity. We conclude that learning-by-exporting might be more properly characterized as “learning about and exploiting new markets” rather than “learning about new technologies” as prior studies often implied.