PUBLICATIONS & REPORTS

Contents Introduction

The objective of this paper is to empirically examine the relationship between innovation, productivity and trade intensity using firm-level data from the Malaysian manufacturing sector. Evidence from this paper suggest that exporters do have higher productivity levels compared to non-exporters. Regressions on production functions indicate that exporting may not necessarily be an important driver of productivity growth compared to capital and labour. Estimates from structural models show that the mechanisms by which exporting may influence productivity in Malaysia is one in which productivity gains are driven primarily by process innovation (rather than product innovation) which, in turn, is influenced by exporting through the decision to undertake R&D.