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A Multimediation Model of Learning by Exporting: Analysis

of Export-Induced Productivity Gains
Article in Journal of Management · February 2017

DOI: 10.1177/0149206315573998
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Journal of Management
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DOI: 10.1177/0149206315573998
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A Multimediation Model of Learning by

Exporting: Analysis of Export-Induced
Productivity Gains
Caleb H. Tse
Sungkyunkwan University
Linhui Yu
Zhejiang University
Jianjun Zhu
University of Hong Kong
This paper “opens a black box” in examining how and under what conditions do firms achieve
productivity gains by exporting, conventionally known as the learning-by-exporting (LBE)
effect. We extend the current theoretical paradigm by proposing that exporters utilize strategic
decisions pertinent to innovativeness, production capability, and human capital so as to lever-
age knowledge and resources obtained from exporting in order to achieve productivity gains.
We test and validate our hypotheses with panelized data of roughly 250,000 Chinese firms over
a 7-year period (2001-2007). We also show that the salience of these mediation mechanisms is
contingent upon ownership structure and industry characteristics: Non-state-owned enterprises
and firms in industries with medium export intensity or medium and high new product develop-
ment intensity effectuate more learning through these conduits than their counterparts. The
multimediation mechanism LBE model offers useful implications for academia, practitioners,
and policy makers.
Keywords: organizational learning; export performance; innovation management; exploita-

tion/exploration
Acknowledgments: This study was supported by a grant from the National Natural Science Foundation of China
(project code 71402162). The authors would like to thank the editor, Annette Ranft, and two anonymous Journal of
Management reviewers for their constructive comments on earlier versions of this manuscript. We would also like to
thank David K. Tse for his helpful suggestions and guidance. The authors have contributed equally to this manuscript.
Supplemental material for this article is available with the manuscript on the JOM website.
Corresponding author: Linhui Yu, School of Economics, Zhejiang University, Hangzhou, China.
E-mail: yulh@zju.edu.cn
2118
Tse et al. / A Multimediation Model of Learning by Exporting 2119
Learning by exporting (LBE), the contention that firms learn through exporting activities
and subsequently achieve productivity gains (Aw, Chung, & Roberts, 2000), has emerged as
an important topic in strategic management (Salomon & Jin, 2010), economics (Castellani,
2002), and international business (Salomon & Jin, 2008). Through exporting, the most preva-
lent form of internationalization, firms are believed to acquire firsthand information on over-
seas markets (Wagner, 2007), upgrade product designs (Serti & Tomasi, 2008), and adopt
new technologies (Aw, Roberts, & Winston, 2007) as they serve diverse customers and com-
pete with both domestic and foreign firms. Despite the theoretical foundation, the field has
so far failed to reach empirical consensus on this issue, as many have provided ample evi-
dence using developing and emerging economy contexts (Aw et al., 2000) while others failed
to find sufficient empirical support for the effect (Bernard & Jensen, 1999; Clerides, Lach, &
Tybout, 1998). However, in a highly competitive global market, the promise of productivity
gains through global expansion has strong implications and demands a critical understanding
for academics, managers, and policy makers.
Despite its importance, LBE remains a relatively underexplored topic. Extant research has
predominantly emphasized the direct relationship between exporting and productivity, and
few have made attempts to uncover the potentially profound mechanism of “learning”
(Castellani, 2002). However, it will be too simplistic or even misleading to build our conven-
tional wisdom on the direct causality between exporting and productivity gains. The rationale
for the LBE effect is rooted in organizational learning and international knowledge transfer
literature (Fiol & Lyles, 1985; Salomon, 2006), which suggests that it should be not the
exporting behavior in itself that is critical to productivity improvements but instead the effec-
tive flow, absorption, and conversion of subsequent knowledge that is acquired from export-
ing. This similar idea is advocated by Silva, Afonso, and Africano (2012) in an extensive
review of LBE literature, who state that “ideally, LBE should be measured using information
on the specific mechanisms through which firms learn in order to innovate or to become more
efficient” (p. 282). The mastery of the complete learning process is rare and challenging
(Day, 1994); therefore, to complement the information flow in organization learning, firms
rely on inherent learning-based “disciplines.” In this sense, exporting firms’ strategic deci-
sions to facilitate, instrument, and manage the learning process through exporting become
the underlying core unknowns. The lack of comprehension on the mediating mechanism(s)
limits our capability in understanding the effectiveness of exporting on productivity gains,
including the seemingly conflicting evidence on the existence of learning from exporting
behavior. It also bottlenecks theory development, which could adversely affect subsequent
managerial implications derived from this relationship.
Thus, the fundamental contribution of this study is our investigation into the internal
mechanisms of the learning process from exporting. In other words, our study “opens the
black box” and extends from previous efforts by postulating a multimediation LBE model.
Our objective is to go beyond the anecdotal evidences regarding the LBE effect and take a
step further in unveiling the underlying mechanisms that mediate a firm’s productivity
increase from exporting. While knowledge flow in firm learning (i.e., acquisition, distribu-
tion, interpretation, and integration; Slater & Narver, 1995) is in itself unobservable to us, it
is manifested in more readily observable business decisions and practices (Schein, 1985). We
propose that the LBE effect is achieved, at least partly, through the mediating roles of firm
innovativeness, production capability, and human capital. A number of premises support the
need for this expanded multimediation mechanism of LBE.
2120 Journal of Management / September 2017
First, a multimediation model better fits the multidimensionality of knowledge (Huber,

1991) that can be acquired and exploited by exporting firms. When firms serve customers
and compete in overseas markets, they are exposed to a broad array of diversified knowledge.
Learning and commercialization can occur within multiple domains when firms are exposed
to various types of new knowledge (Dierkes, Berthoin-Antal, Child, & Nonaka, 2003), and
multiple strategic intents and areas of improvement are common (Luo, Zhao, Wang, & Xi,
2011). Thus, a multimediation LBE model better captures the multifaceted nature of firms’
learning.
Second, in the process of LBE, improvements in product innovation (Cassiman &
Golovko, 2011), production capabilities (Serti & Tomasi, 2008), and human capital (Djankov
& Hoekman, 2000) are among the most crucial objectives to fulfill in facilitating knowledge
acquisition, interpretation, and integration. To begin, LBE through innovation may reflect the
learning mechanism involved in exploration, which encompasses the pursuit and acquisition
of new knowledge, and the shift to a different technological trajectory (He & Wong, 2004).
On the other hand, LBE through production capability improvement may reflect the learning
mechanism involved with exploitation, which refers more to the utilization of past knowl-
edge and improvements in components that build on the existing technological trajectory
(Benner & Tushman, 2002). Both the processes of exploration and exploitation may be stim-
ulated through exporting. In addition, LBE effects may also be experienced at the manage-
ment level of an exporting firm. Through exporting, firms may learn by enhancing human
capital, such as managerial practices that provide direction, facilitate change, better utilize
resources, foster personal skills, and achieve results (Delery & Doty, 1996).
Third, a multimediation LBE model reflects the learning effectuated potentially through
different channels, and managers may choose to emphasize firms’ learning on one or multi-
ple mediums contingent on their learning orientation (Juran & Gryna, 1988), specializations
(Williamson, 1985), risk tolerance (Slater & Narver, 1995), and operating domains and sys-
tem architecture (Koza & Lewin, 1998). This issue is especially salient for emerging market
firms, our study context, where resource availability and associated costs for implementation
differ heavily across firms (Luo & Tung, 2007).
Last, a multimediation LBE model is useful to policy makers. The takeaway from this
study will contribute to the development of effective policies, so that domestic firms can
satisfy more efficiently its clients’ latent and actual needs (Day, 1994), neutralize threats to
gain market advantages (Hult, Ketchen, & Nichols, 2003), and reduce environmental com-
plexity and uncertainty (Slater & Narver, 1995).
Challenged by their limited resources, business managers and public policy makers fur-
ther find it crucial to understand how firms in different business and industrial contexts learn
and how this learning can be stimulated. The related questions may be, does firm ownership
structure (i.e., institutional rigidities and motivational problems) have any influence on these
learning mechanisms? Similarly, does industry heterogeneity moderate the effectiveness of
learning mechanisms so that firms in some industries learn more effectively and efficiently
than in others? To fill these gaps, our study investigates the effectiveness of the proposed
learning mechanisms between state-owned enterprises (SOEs) and non-SOEs and across
industries varying in export intensity and new product development (NPD) intensity.
In sum, our study aims to contribute to the literature on LBE in three ways. First, it
conceptually delineates and empirically verifies a multimediation LBE model, paying
attention to the mediating effects of three particular domains: innovativeness, production
capability improvement, and enhancement of human capital. By verifying the significance

of these mediating mechanisms, the study helps establish them as learning instruments for
productivity gains as a result of exporting. Second, we examine the specific contingent
conditions under which these learning mechanisms are significant. We do so by contrasting
the LBE mechanisms across firms with different ownership structure and industry charac-
teristics. This allows us to examine the issues related to heterogeneity in learning and
absorptive capacity at the industry level. Third, using a large panel data set of Chinese
firms from 2001 to 2007, our systematic and in depth investigation into the LBE effect
focuses on the world-leading country in terms of exporting. The study thus provides
insights into the growth of emerging market firms as they continue to proliferate in the
world economy.
Theory and Hypothesis Development

Literature on LBE
The basic tenet of the LBE hypothesis states that as a result of entering export markets,
firms acquire overseas knowledge, which leads to productivity gains (Clerides et al., 1998;
Wagner, 2007). A plethora of studies have examined the LBE hypothesis, showing a mix of
empirical evidence. Although some studies either were unable to find productivity increases
as a result of exporting (Greenaway, Gullstrand, & Kneller, 2005) or attribute the higher
productivity levels found among exporters as self-selection (Bernard & Jensen, 1999),1 the
majority of research in support of LBE attributes the learning effects of exporting to the
acquisition of new technologies, product ideas, production methods, and so on from foreign
agents and through competition (Serti & Tomasi, 2008). While most studies are conducted in
economics (Aw et al., 2007; Serti & Tomasi, 2008) and some in business management litera-
ture (Salomon & Jin, 2008, 2010), the core of this explanation has roots in organizational
learning literature, which purports that firms can learn and adapt in the face of new customer
demands (Clerides et al., 1998), technological advancement (Cassiman & Golovko, 2011),
and an external economic environment (Salomon & Shaver, 2005), resulting in an improve-
ment in productivity.
Yet, literature to this point has mainly documented the LBE effect without examining the
underlying learning mechanisms of what exactly firms learn from exporting (Wagner, 2007).
To fill this gap, our study attempts to unveil the learning mechanisms from exporting. In
developing a theoretical model for mediation effects, we turn our attention toward the core
linkage among exporting strategic actions and productivity by providing a more profound
understanding of mediation. Specifically, we theorize on how a firm’s strategic actions medi-
ate the relationship between exporting and productivity gains. Exporting grants a firm access
to unique experiential knowledge and technical resources. However, controlling for superior
knowledge and resources is a necessary but insufficient condition for productivity gains. It is
equally imperative for a firm to adequately leverage these endowments (Sirmon, Hitt, &
Ireland, 2007). Therefore, it is not the exporting activity itself that is important in positively
driving productivity but, rather, some firm-level strategic decisions that are crucial in actual-
izing the value of knowledge and resources obtained from exporting. Specifically, we posit
that the LBE effect is multifaceted and concurrent, involving a number of core organizational
processes (i.e., innovativeness, production capability improvement, and human capital
Figure 1
Multimediation Learning-by-Exporting (LBE) Model
Black Box of Learning-By-Exporting

Multi-Mediation Mechanism
Innovativeness
Exporting Production Capability Productivity
Human Capital
Moderators
Ownership structure
-SOE vs Non-SOE
Industry Heterogeneity
- Export Intensity
- New product development
(NPD) intensity
enhancement) for exporters to leverage their foreign-acquired knowledge and various

resources to achieve productivity gains. Although the rationale for why managerial decisions
mediate the resource–performance relationship applies to innovativeness, production capa-
bility, and human capital, the theoretical basis for how they mediate the relationship between
exporting and productivity differs. We discuss the mediating mechanisms one by one in the
next section. Figure 1 summarizes our conceptual model.
Productivity Gain Through Firm Innovativeness

Our first proposed mediating mechanism to LBE is through firm innovativeness, which is
defined as a firm’s capacity and willingness to introduce novel and useful products or ser-
vices through innovation processes (idea generation, experimentation, and commercializa-
tion; Rogers, 2003). This strategic orientation focuses on developing new products and
services. It effectuates exploration of acquired knowledge and resources, takes the firm to a
different technological trajectory (Benner & Tushman, 2002) or product-market domain (He
& Wong, 2004), and ultimately achieves productivity gains.
When exporting firms expand and diversify internationally, they are exposed to new over-
seas markets as well as to new technologies, products, and/or process designs from foreign
competitors (Zahra, Ireland, & Hitt, 2000). Exporting firms need to respond to the changing
demands from overseas customers and must either improve their existing products or create
new ones (Clerides et al., 1998). This tendency makes it necessary for exporters to lay
emphasis on technological innovation (Djankov & Hoekman, 2000). Hence, entering export
markets should result in an increased level of innovativeness for the firm.
As innovativeness increases due to foreign exposure, exporting firms not only incorporate
new technologies, product designs, and production methods into their operations but also
may learn to creatively use resources (capital and labor) in generating higher-value outputs
and may explore new alternatives through research and development (R&D) activity (He &
Wong, 2004). By disseminating new technological and customer/market knowledge through-
out different divisions internally, firms can potentially achieve gains in productivity through
increasing operational efficiency, reducing production costs, rejuvenating current goods and
services, and capturing an increased demand for new products (Cassiman & Golovko, 2011).
Enhanced innovativeness not only leverages the firm’s knowledge on overseas markets,
new technologies, and process designs from foreign competitors more fully but also facili-
tates learning in line with exploration processes. This is often exemplified by activities such
as acquiring advanced skills, utilizing additional resources, developing radical ideas, and
integrating new definitions of customer needs. Therefore, new product ideas, designs, and
technologies from knowledgeable buyers as well as marketing competence gained through
exporting are likely to be cultivated through innovation in the form of increased patent appli-
cations (Salomon & Jin, 2008, 2010) and the development of new and better products. This
strategic focus on innovation in essence facilitates an exporting firm’s internalization and
recombination of new acquired knowledge throughout the organization, thus increasing the
firm’s overall productivity. As such, we propose the following:
Hypothesis 1a: Greater exporting is positively associated with firm innovativeness.

Hypothesis 1b: Firm innovativeness is positively associated with firm productivity.
Hypothesis 1c: Firm innovativeness mediates the relationship between exporting and firm
productivity.
Productivity Gain Through Production Capability Improvement

Second, we propose that exporting can trigger production capability improvements, which
can also lead to productivity gains. Production capability improvement involves the pro-
cesses through which a firm upgrades its capability in managing quality, capacity, process,
logistics, and relevant workforce during the process of transforming inputs into goods and
services through effective investment and resource allocation (David, 2005). Compared to
the strategic focus on innovation, which relies more on exploration processes, production
capability improvement reflects firms’ refinement in production, efficiency, and implementa-
tion (March, 1991). This reflects mediation effects through exploitation processes.
Exploitation aims at leveraging existing resources in product-market domains, committing
investments to ensure the current viability of the firm, and searching for improvements along
a fixed production function (Auh & Menguc, 2005; He & Wong, 2004). We argue that the
strategic action to improve production capabilities as a result of exporting will subsequently
increase productivity gains.
Exporting firms are likely to improve their production capabilities as a response to foreign
market demands and characteristics for two reasons. First, exporting firms tend to face more
diverse customer groups who demand higher standards in product quality and consistency
(Serti & Tomasi, 2008). This forces the exporter to focus on execution refinements, engage
in similar activities more efficiently, and enhance process controls (March, 1991; Porter
1990). In response, exporting firms will likely increase their capital investments, expand
existing assets, and construct new production facilities. Second, when engaging in exporting
activities, firms are often challenged by the divergence between their existing production
capabilities and new business requirements. As a result, they need to improve their produc-
tion facilities and upgrade their physical assets (e.g., equipment, building, technologies) in
order to meet potentially higher technical quality and safety standards, more stringent logis-
tics requirements, and delivery deadlines (Castellani, 2002). These production facility invest-
ments and physical asset upgrades signify firms’ production capability improvements
(Prescott, 1997).
Next, these improvements in production capability are then integrated within the firm’s
industrial knowledge. This helps to achieve the efficiency of routinization and reliability in
production (Juran & Gryna, 1988), for which the return is typically positive, proximate, and
predictable (Auh & Menguc, 2005). Having increased their capital investments due to higher
demands from exporting (i.e., upgrading production facilities, incorporating new production
processes and methods), firms are more likely to achieve better economies of scope and
scale, higher-capacity utilization, and subsequent productivity increases (Castellani, 2002).
In sum, firms facing new demands from exporting likely initiate the strategic action to
improve its production capabilities. Through these increased capital investments to expand
and upgrade existing production elements (e.g., equipment, property, facilities), exporters are
able to leverage and exploit the knowledge and resources from exporting to achieve increased
cost advantages, capacity utilization, and ultimately, productivity gains. We hypothesize the
following:
Hypothesis 2a: Greater exporting is positively associated with production capability improvement.
Hypothesis 2b: Production capability improvement is positively associated with firm productivity.
Hypothesis 2c: Production capability mediates the relationship between exporting and firm
productivity.
Productivity Gain Through Human Capital Enhancement

Third, we conjecture that exporting leads to productivity gains through improvement in
human capital. Business practices are shown to trigger enhancement of human capital (Hatch
& Dyer, 2004) as a means to increase long-term performance output. As a result of increased
globalization and in response to rising competition, firms invest intensively to improve
human capital by enhancing the management functions of organizing, staffing, motivating,
planning, training, and controlling human resources (David, 2005). We argue that these
improvements to human capital effectively facilitate the recombination and internalization of
knowledge and resources acquired through exporting, leading to productivity increases (De
Boer, Van Den Bosch, & Volberda, 1999).
New market demands and challenges from exporting, such as higher quality standards,
stringent logistics requirements, and distribution channel issues, produce heavier workloads
that may require new business practices and skills to facilitate learning (Slater & Narver,
1995). It is inevitable for exporting firms to learn and implement managerial best practices
(e.g., capital budgeting, strategic planning, government lobbying) and develop management
structures to deal with these challenges (Djankov & Hoekman, 2000). As firms become more
involved in exporting, they require better human resources to facilitate the integration of their
learned knowledge from international best practices and therefore become more
managerially oriented (Serti & Tomasi, 2008). Therefore, exporters are likely to emphasize
acquiring and maintaining superior human capital as key to their corporate globalization
strategy.
The enhancement of human resources and talents by means of international and industry
experience, better communication skills, and leadership training is often both desired and
necessary to bring firms in line with the stricter demands of embracing knowledge gained
from the external environment. This constitutes a unique reservoir of human capital that is
not easily imitated or copied by competitors and thus unequivocally displays competitive
advantage (Barney, 1991). Firms benefit from upgrading their human resources and talents
(e.g., managers with more international exposure and industry experience as well as higher
levels of strategic thinking, leadership skills, and technical skills) to ensure that internal pro-
cesses, such as stricter quality controls and external communication with agents, are carried
out efficiently. In sum, superior human capital can help to improve operational performance,
such as productivity.
Facing new stringent demands and challenges from export markets, a firm’s employees
carry the pivotal role of working with the acquired knowledge and technical know-how from
exporting. To effectuate the “learning” from exporting, it is also crucial for exporting firms to
take the strategic action to improve its human capital through acquiring more experienced
managers and professionals who are more knowledgeable and can execute better management
procedures while demonstrating leadership (Delery & Doty, 1996; Serti & Tomasi, 2008)
before they can achieve productivity gains from exporting. This is particularly meaningful for
emerging economies, such as China, where emphasis on human capital investment has gener-
ally lagged behind developed countries (Heckman, 2005). Thus, improvements in managerial
human capital to facilitate and leverage acquired exporting knowledge and technology within
the firm likely lead to increased productivity. As such, we hypothesize the following:
Hypothesis 3a: Greater exporting is positively associated with improvement in human capital.
Hypothesis 3b: Improvement in human capital is positively associated with firm productivity.
Hypothesis 3c: Human capital mediates the relationship between exporting and firm productivity.
Effects of Ownership and Industry Heterogeneity on LBE Mechanisms

Having established the possible mechanisms that mediate the LBE effect for exporters, we
now examine firm-level and industry-level heterogeneity among these mediating mecha-
nisms. Although some studies have examined differentiated export learning effects across
various firms and industries (Aw et al., 2000; Salomon & Jin, 2008, 2010), questions regard-
ing firm and industry characteristics that affect learning mechanisms from exporting still
remain. While it has been shown that firms’ capabilities affect their ability to learn (March,
1991), little is known about how firm ownership types and their associated rigidities may
also affect learning processes. We thus compare the salience of the three proposed mecha-
nisms between private and state-owned firms. Also, LBE represents an attractive develop-
mental strategy to strengthen the productivity of firms across different industries. Firms in
the same industry share some similarities in their investment endowment, technology adop-
tion, knowledge acquisition, and production factors, which contribute to forming relatively
stable comparative advantages over time (Porter, 1990). Thus, we also investigate the pro-
posed mechanisms across industries that vary by export intensity and NPD intensity.
Investigating firm- and industry-level heterogeneity of the LBE effect would yield signifi-
cant insights for managers and policy makers.
Learning Between SOEs and Non-SOEs

Drawing from literature on SOEs, especially in emerging economies, like China, we sug-
gest that SOEs may be less motivated to learn to optimize their innovativeness, production
capabilities, and human capital management, compared with non-SOEs, which indicates
potential differences in LBE mechanisms.
From an organizational perspective, SOEs tend to prioritize other goals rather than
improving operational efficiency and production capability. First, to maintain societal equity,
SOEs may strive for “societal stability,” controlling asset divestiture, curtailing unemploy-
ment, and stabilizing taxation (Holz, 2007). Second, capital markets via open-market mecha-
nisms, such as capital investment and corporate takeovers, can monitor enterprises and
discipline managers who employ their resources inefficiently (Fama & Jensen, 1983).
However, SOEs have softer budgets and are not directly subject to the disciplining laws of
the capital markets. Third, governments may designate certain industries as “strategic” or
“pillar” to their national interests and bar competition from private sectors and especially
foreign firms. Therefore, SOEs operating in these industries essentially operate in monopo-
listic environments (Hemphill & White, 2013). They often receive significant government
subsidies to support their domestic growth, exporting, and R&D for innovation (Eckaus,
2006), which further affects their learning incentives. Last, certain SOEs are picked as
“national champions” that are nurtured by the government and therefore do not experience
market and competitive pressures that would drive them to learn to be more innovative, effi-
cient, and productive (Hemphill & White, 2013).
At the management level, SOEs are characterized with less effective human capital man-
agement in the sense that relevant investments are not optimized to stimulate managers’
performance. On the one hand, managers with direct or indirect equity in the firm will tend
to uphold the interests of the enterprise (Jensen & Meckling, 1976). Yet in most countries,
institutional rigidities limit the flexibility of SOEs in setting up incentive systems for its
managers, such as the lack of pay structures that link salary to performance. In other cases,
stock options offered to SOE executives are often fake (unreasonably high execution prices)
and seldom executed (Chen, Guan, & Ke, 2013). On the other hand, state representatives are
frequently placed in key management positions in SOEs (Holz, 2007) and tend to have a dif-
ferent set of skills compared to their counterparts in private firms. While managers of private
firms emphasize market performance in order to survive and prosper, SOE managers may
benefit more from their competence in dealing with politicians (Tan & Peng, 2003). In addi-
tion, job security has traditionally been stronger in the public sector than in the private sector.
With a reduced probability of losing their jobs, SOE managers may have less incentive and
put less effort in improving firm performance. As such, the resource allocation to human
capital improvement is not optimized for SOEs, where SOE managers can be more con-
cerned with fostering governmental ties and less motivated and capable of improving firm
learning and performance (Peng & Luo, 2000). Thus, we hypothesize the following:
Hypothesis 4: Non-SOEs demonstrate a significant LBE effect through their learning mechanisms,
while SOEs demonstrate a weak LBE effect through their learning mechanisms.
Learning in Industries of Different Export Intensities

At the industry level, exporting brings the benefits of exposure to foreign knowledge from
overseas markets, new technologies, products, and/or process designs that can spill over
within the industry (Zahra et al., 2000). Yet, the technological knowledge and marketing
competence gained through the learning mechanisms may be conditional upon the level of
exposure and knowledge exchange with the international market. Within a firm, productivity
gains are realized by proficiency of managers, engineers, and workers; improvements in
technology and capital improvement; and renovation of structure, routines, and cross-
functional coordination (Argote, 1999). However, organizational learning theory predicts
that the economic learning of productivity and efficiency generally follows the same pattern
of experience curves in first speeding up and then slowing down once a practically achiev-
able level of improvement is reached. Ample evidences show that learning effects first
increase and then decrease at a decreasing rate, whether it concerns unit cost of production,
hours of labor required, or so on at the individual firm or industry levels (Argote, 1999;
Argote, Beckman, & Epple, 1990). Thus, industries with little exposure to exports may
hardly demonstrate learning through the mechanisms. Despite their efforts in optimizing firm
strategies to facilitate the learning process, there is limited external knowledge and technical
resources gained from their internationalization to be absorbed, internalized, and capitalized.
On the other hand, industries that have gained much international experience from exporting
and have established industry norms with standardized international operations may have
plateaued in their capacity for learning and productivity gains. There may be a ceiling effect,
in which industries exporting above a certain level have already gained sufficient exposure
to advanced knowledge and thus may not further achieve significant productivity gains
through the learning mechanisms. Thus, we propose the following;
Hypothesis 5: Industries with moderate export intensity demonstrate a significant LBE effect
through their learning mechanisms, while those with low or high export intensity demonstrate a
weak LBE effect through their learning mechanisms.
Learning in Industries of Different NPD Intensities

NPD, as an outcome measure of innovativeness (Sengupta, 1998), signifies an industry’s
motivation toward learning and its emphasis on the integration of acquired knowledge
(Leonard-Barton, 1995). Firms within industries with numerous and frequent new product
introductions reflect their orientation toward continuous innovation in their commitment to
R&D investments (Veryzer, 1998) and emphasis on new knowledge generation to keep up
with developments in the industry (Aw et al., 2007; Salomon & Jin, 2008). Moreover,
research on vicarious learning suggests that firms in these dynamically competitive and inno-
vation-focused industries can imitate technologies, operational processes, and managerial
practices from referent organizations and thus benefit from the accumulated knowledge and
experience of their industry counterparts (Argote et al., 1990). Exposure to a more innovative
and productive environment urges firms to optimize their strategic decisions over time to
facilitate the absorbing and assimilating of new knowledge gained through internationaliza-
tion activities, like exporting. In contrast, firms in industries with slower NPD pace have less
pressure and fewer opportunities to emulate their more advanced counterparts in other
industries in terms of technology and practical norms. They generally devote less attention to
improvements and innovation and consequently place less of an emphasis on making strate-
gic moves to facilitate learning from exporting. Thus, we propose the following:
Hypothesis 6: Industries with high levels of NPD demonstrate a significant LBE effect through their
learning mechanisms, while industries with lower levels of NPD demonstrate a weak LBE effect
through their learning mechanisms.
Data and Variables

Study Context and Data
We choose China as our study context, which has experienced phenomenal growth in
exporting. After China opened up its borders to international trade by adopting an open-door
policy and becoming a member of the World Trade Organization (WTO) in 2001, its exports
have grown exponentially, overtaking Japan in 2004 to become the world’s third-largest
exporter and eventually surpassing Germany in 2009 to become the number-one global
exporter. Interestingly, despite China’s importance to global exporting, few studies have
investigated LBE effects among Chinese exporters, especially in the last two decades, when
Chinese exporting rose to prominence. Similar to other developing-economy firms, Chinese
firms were known to lag behind firms from developed markets in various technological and
managerial domains. As extant literature highlights, the size of the technological gap between
exporting countries is a pivotal driver for LBE effects (Salomon & Jin, 2008, 2010). Through
internationalization, such as exporting, Chinese firms have addressed some of their competi-
tive disadvantages in management expertise and technological capabilities (Child &
Rodrigues, 2005) and have compensated for their “latecomer” status in the global economy
(Luo & Tung, 2007). Thus, this exporting growth period of Chinese firms (after China entered
the WTO) presents an ideal context for investigating the learning mechanisms of LBE.
We compiled our data from the Annual Industrial Survey conducted by the National
Bureau of Statistics of China. This data set provides a comprehensive set of operational and
financial information of all SOEs and the “above-scale” non-SOEs in China (i.e., annual
sales above RMB 5,000,000, or US$620,000). This source has been proven to be reasonably
accurate and reliable (Cai & Liu, 2009).
Our sample is an unbalanced panel of 249,326 domestic state-owned and private firms,
which spans a 7-year period (2001 to 2007), covering 29 two-digit Standard Industrial
Classification (SIC) manufacturing industries (or 171 narrowly defined three-digit indus-
tries) and China’s 31 provinces and municipalities.
Dependent Variable
Following previous research in business strategy and economics, we use firm total factor
productivity (TFP) as our dependent measure (Siegel & Simons, 2010). TFP is defined as the
portion of output not explained by the amount of traditional inputs used in production (e.g.,
labor, capital, materials). In this sense, TFP usually measures the technology or production
efficiency of a firm. We adopt Ackerberg, Caves, and Frazer’s (2006) approach to estimate
the firm-level TFP. Our TFP estimation procedure is detailed in the appendix (see online
supplement).
Independent Variables
Export. Following Salomon and Jin (2008), we use log-transformed export volume
to measure a firm’s export behavior. The export volume information is obtained from the
reported value of exported products by each firm.
Firm innovativeness. We measure firm innovativeness by using a firm’s expenditures

(log-transformed) in R&D. In our context of manufacturing industries, “innovation” refers
primarily to new knowledge, technological improvement, and the relevant business devel-
opments. A firm’s investment in R&D indicates the extent of resources committed to main-
tain and develop new and existing products (Soh, 2010). All of the above contribute to
new technology and/or design to develop new products, which demonstrates a significant
improvement in material quality, craftsmanship, and/or functionality. As such, we use R&D
expenditure as a proxy for innovativeness, which is a fully controllable strategic decision.2
Production capability. We compute a firm’s capital investment (log-transformed) as

a surrogate for its improvement in production capability. A firm’s capital investment cap-
tures the extent to which a firm spends on its facility and equipment to improve production
(Shaver, 2011) and has been used to explain firm productivity and performance (Serti &
Tomasi, 2008). This investment in facility and equipment enters into capital stock and depre-
ciates according to accounting rules. The capital stock evolves according to the following
equation, from which we derive the value of capital investment.
Capital Stocki,t = (Capital Stocki,t−1 – Value of Depreciationi,t−1) + Capital Investmenti,t. (1)
Human capital. Effective human resource management focuses on selecting and retain-
ing highly capable employees with unique skill sets. A firm’s investment in human resources
captures the value of its human capital (Koch & McGrath, 1996). Following Elfenbein, Ham-
ilton, and Zenger (2010), we use the total value (log-transformed) of fixed/basic wages in a
firm as the measure of human capital.
Control Variables
Capital stock. Literature has long recognized the influence of firm size on firm’s produc-
tivity (Salomon & Jin, 2008). Firms of a larger size are generally more resourceful and domi-
nant in their respective industries. We use log-transformed firm’s capital stock to control for
firm’s capital size.
Number of employees. Similarly, we use log-transformed number of employees to control

for firm staff size (Schreiner, Kale, & Corsten, 2009). Because large employee numbers lead
to large value of human capital (measured with wage expenses), the inclusion of the staff
size controls for this employee size effect and helps purify the effect of human capital on
productivity.
Firm age. Productivity and performance levels generally evolve as firms mature and
become more experienced (Soh, 2010). We control for this age effect on a firm’s overall
productivity. Age is measured by the number of years since a firm’s registration.
Subsidies. For firms potentially engaged in an exporting business, special treatment,

such as government subsidies, may have an impact on their export (Eckaus, 2006) and may
increase the level of exports. They help a firm improve its cost structure, daily operations,
business strategies, and competitive advantages, which in turn contributes to its productivity
output. We include the reported government subsidies (in millions of yuan) in our analyses
as a control.
Other controls. We also included a set of year, industry, and province dummies to capture
the potential longitudinal, cross-industry, and geographic variations in productivity.
Ownership Structure
SOE. We created an SOE dummy with the value 1 if the firm is an SOE (with dominant
state ownership) and 0 otherwise.
Industry Characteristics
Export intensity. We define the export intensity of an industry as the average export inten-
sity (i.e., the ratio of its total export value to its total sales) of all firms in the industry. And we
calculate the industry-level (defined by three-digit SIC) export intensity for the study period
of 2001 to 2007. We then rank all 171 manufacturing industries in ascending order accord-
ing to their export intensity. We define industries in the first quintile (0%-20%) as those of
low export intensity, in the second to fourth quintiles (20%-80%) as those of medium export
intensity, and in the fifth quintile (80%-100%) as those of high export intensity.
NPD intensity. NPD, as an outcome measure of innovativeness (Sengupta, 1998), char-

acterizes an industry’s efforts and performance in improving product quality, craftsmanship,
and functionality (Iyer, LaPlaca, & Sharma, 2006). We proxy NPD intensity with new prod-
uct sales, which is calculated as the average new product sales ratio (i.e., the ratio of a firm’s
new product sales to its total sales). Likewise, we define industries in the first quintile (or,
0%-20%) in new product sales as those of low NPD intensity, in the second to fourth quin-
tiles (20%-80%) as those of medium NPD intensity, and in the fifth quintile (80%-100%) as
those of high NPD intensity. Our method yielded similar results to previous studies on the
classification of industries with respect to innovation (Audretsch & Feldman, 1996).3 Table
S1 (available as part of the online supplement) lists a set of examples of industries with dif-
ferent levels of export intensity and NPD intensity.
Identification Strategy
Econometric Model
We develop a series of equations to test the proposed hypotheses. First of all, we examine direct
effect of exporting on productivity free of mediators using
∑
J
Productivityit = β10 + β11 × Productivityi ,t −1 + β12 × Export i ,t −1 + γ1 j × Controlijt + 1i + 1it , (2)
j =1
where i stands for firm i, t stands for year t, and Controlijt includes control variables, such as
firm capital stock, number of employees, firm age, subsidies, and year, industry, and prov-
ince dummy variables. We test the direct effects of three mediators on productivity free of the
variable Export, using
Productivityit = β20 + β21 × Productvity i ,t −1+ β23 × Innovativeness it + β24
× Production Capability Improvement it + β25 × Human Capital it
(3)
∑
J
+ γ 2 j × Controlijt +  2i +  2it
j =1
Next, we study exporting’s effect on three such proposed mediators as
Innovativenessit = β30 + β31 × Innovativenessi ,t −1 + β32 × Export i ,t −1 + β34

× Production Capability Improvement it + β35 × Human Capital it
(4)
∑
J
+ γ 3 j × Control ijt + 3i + 3it
j =1
To capture the possible correlation between innovativeness and the other two firm actions
of production capability improvement and enhancement of human capital, we include them
in the model. The similar formulation is adopted for Equations (5) and (6).
Production Capability Improvement it = β40 + β41 × Production Capability Improvement i ,t −1

+ β42 × Export i ,t −1 + β43 × Innovativeness it + β45 × Human Capitalit
(5)
∑
J
+ γ 4 j × Control ijt +  4i +  4it
j =1
Human Capital it = β 50 + β 51 × Human Capital i ,t −1+ β 52 × Export i ,t −1+ β 53 × Innovativenessit + β 54
∑
J
× Production Capability Improvement it + γ 5 j × Controlijt + 5i + 5it (6)
j =1
Last, we model the mediators’ effect on productivity after controlling exporting as
Productivity it = β60 + β61 × Productivity i ,t −1+ β62 × Export i ,t −1

+ β63 × Innovativeness it + β64 × Production Capability Improvement it
(7)
∑
J
+ β65 × Human Capital it + γ 6 j × Controlijt +  6i +  6it
j =1
This model formulation allows us to examine the direct and indirect LBE effects and test
for the existence of the three learning mechanisms (Preacher & Hayes, 2008).
Estimation Method
We take steps to improve the model control and minimize possible misspecifications for
Equations (2) through (7). First, we form a fixed-effect model to control for the potential varia-
tion of dependent variable across time, industries, and provinces (Arellano, 2003). Second, we
use the lagged terms of key variables (e.g., Exportt−1) to control for their lagging effects on the
dependent measures (e.g., Productivityt) (e.g., Salomon & Jin, 2008, 2010).4 It also alleviates
the potential reverse causality concern of exporting and the dependent measures.
Despite these careful specifications we set for our model, endogeneity still remains as a
concern for our proposed model. First, there is a simultaneity issue. Although the 1-year
lagged export volume has been employed in the model to enforce the causal relationship
between exporting and productivity, it is likely that the decision to export depends on produc-
tivity in previous year (t−1), which might be correlated with the productivity of the current
year. Failure to control for this will bias the estimate upwards (Equations [2] and [7]). A simi-
lar argument can be derived for the linkage between Export and the three mediators (Equations
[4], [5], and [6]) as well. On the other hand, the proposed mediation channels that lead to
productivity gain, that is, Innovativeness, Production Capabilities, and Human Capital, are
endogenous because firms may adjust these strategic decisions when they observe their pro-
ductivity in the previous year, causing the simultaneity issue (online appendix Equation [2]
and Equations [1] and [5]). Second, there is an issue of omitted variables. There are exoge-
nous factors that might cause changes of firm behavior (e.g., exporting), which is beyond the
control of our proposed model. For instance, some firms may stop exporting during the
sample period due to lack of international competitiveness (e.g., low logistic capability,
insufficient resources, temporary regulatory change, etc.) or simply better business opportu-
nity in home market. These issues open substantial concerns regarding omitted variable bias
(Equations [2], [4] through [7]). Similar concerns can be derived for three mediators as well
(Equations [2], [3], and [7]). Leaving these issues unresolved will bias the estimation.
To obtain consistent and unbiased estimates of regression coefficients, we adopt the
dynamic panel generalized method of moments (GMM) estimation approach (Arellano &
Bond, 1991). First, this estimator transforms the regression variables by first differencing and
removes the time-invariant panel-level characteristics (firm-level fixed effects). Second, for
the set of endogenous variables, that is, export volume (Exporti,t−1, Innovativenessit,
Production Capabilityi,t−1, and Human Capitali,t−1), the GMM estimator instruments their dif-
ferences (which are not strictly exogenous) with their available lags in level. All other vari-
ables in the equations serve as candidates of standard instruments in estimation. Specifically,
we assume control variables of capital stock, number of employees, and subsidies as prede-
termined and use their lagged values as exogenous instruments in implementing our GMM
estimation. Other control variables of firm age and dummies are treated as strict exogenous
variables. Moreover, the correct application of this method strictly relies on the important
assumption of autocorrelation (Roodman, 2009), which is largely taken care of with the
lagged dependent variables as predictors. During implementation, we pay extra attention to
the assumptions on overidentification and exogeneity of instruments in order to produce
valid estimates. Last, this method is highly suitable for our data, which have large N (number
of panel firms) and small T (time-year).
Results
Table 1 includes the summary statistics and correlation matrix. The correlations among
key variables are in line with our expectations.
Regression Results: Main Effects

In Table 2, we display GMM estimation results of six models corresponding to Equations
(2) through (7). The Hansen J statistic is relied upon to test the validity of instruments, and the
Table 1
Variable Descriptive Statistics and Correlations
1 2 3 4 5 6 7 8 9 10 11 12 13 14
1. Productivity (t) —
2. Productivity (t−1) 0.46 —
3. Export (t) 0.08 0.06 —
4. Export (t−1) 0.09 0.07 0.85 —
5. Innovativeness (t) 0.06 0.05 0.16 0.15 —
6. Innovativeness (t−1) 0.05 0.05 0.15 0.14 0.78 —
7. Production capability (t) 0.05 0.04 0.11 0.10 0.26 0.26 —
8. Production capability (t−1) 0.06 0.06 0.11 0.11 0.27 0.26 0.58 —
9. Human capital (t) 0.10 0.09 0.24 0.29 0.25 0.27 0.31 0.32 —
10. Human capital (t−1) 0.07 0.07 0.24 0.28 0.24 0.26 0.318 0.32 0.82 —
11. Firm age −0.08 −0.07 0.03 0.03 0.13 0.14 0.18 0.15 0.11 0.13 —
12. Capital stock 0.06 0.06 0.12 0.12 0.32 0.31 0.71 0.65 0.39 0.38 0.22 —
13. No. of employees 0.02 0.02 0.29 0.28 0.31 0.31 0.50 0.49 0.84 0.82 0.25 0.66 —
14. Subsidies 0.02 0.01 0.09 0.08 0.19 0.18 0.21 0.22 0.20 0.20 0.07 0.25 0.21 —
M 1.53 1.52 1.58 1.70 0.62 0.66 6.42 6.29 6.92 6.95 10.02 8.29 4.59 0.70
SD 0.37 0.36 3.53 3.62 1.81 1.84 2.54 2.50 1.25 1.23 12.64 1.67 1.11 1.99
Min −7.38 −7.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 13.92 12.35 17.87 17.36 15.58 15.31 18.58 17.73 16.66 16.66 58 18.42 11.93 14.22
Note: N = 735,126. All correlations are significant at the 1% level.
2133
Table 2
GMM Estimation Results: Whole Sample
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
Production Human
Variable Productivity Productivity Innovativeness Capability Capital Productivity
Lag export .03*** .09*** .07*** .09*** .01

(.00) (.01) (.01) (.00) (.00)
Innovativeness .03*** .00 .01*** .03***
(.00) (.01) (.00) (.00)
Production capability .03*** .00 .02*** .03***
(.00) (.00) (.00) (.00)
Human capital .04*** .01 .29*** .04***
(.01) (.01) (.03) (.01)
Lag productivity .06*** .09*** .08***
(.01) (.01) (.01)
Lag innovativeness .93***
(.01)
Lag production capability .12***
(.01)
Lag human capital .29***
(.01)
Capital stock .02*** .02*** .05*** .89*** .03*** .01***
(.00) (.00) (.01) (.01) (.00) (.00)
No. of employees −.01*** −.04*** .02 −.23*** .61*** −.05***
(.00) (.01) (.02) (.03) (.01) (.01)
Firm age −.00** −.00*** −.00 .00** .00*** −.00**
(.00) (.00) (.00) (.00) (.00) (.00)
Subsidy .00* .00* .03*** .02*** .01*** .00*
(.00) (.00) (.00) (.00) (.00) (.00)
Constant .09*** .10*** −.53*** −3.16*** 1.27*** .69***
(.01) (.02) (.07) (.10) (.04) (.01)
p value of Hansen J .32 .28 .44 .56 .29 .18
p value of AR(1) .00 .00 .00 .00 .00 .00
p value of AR(2) .17 .34 .25 .22 .38 .41
Number of observations 735,126 735,126 735,126 735,126 735,126 735,126
Number of instrumental 56 59 59 59 59 74
variables
Note: Estimates for industry, time, and provincial dummies are omitted. Standard errors listed in parentheses. AR(1)
and AR(2) denote Arellano-Bond test for autocorrelation of order 1 and order 2, respectively. GMM = generalized
method of moments.
*p < .10.
**p < .05.
***p < .01 (all two-tailed tests).
Arellano-Bond test for AR(1) and AR(2) is adopted to ensure the absence of an autocorrela-
tion of order 2 in the residuals. P values of test statistics are reported at the bottom of Table 2.
The results of Model 1 demonstrate the positive and significant effect of exporting on
productivity (.03, p < .01), which strongly supports LBE. The results from Models 3, 4,
and 5 indicate that exporting firms achieve higher levels of innovativeness (.09, p < .01),
production capability (.07, p < .01), and human capital (.09, p < .01), which are in sup-
port of Hypothesis 1a, Hypothesis 2a, and Hypothesis 3a, respectively. Meanwhile,
Models 2 and 6 display positive and significant estimates of these three proposed media-
tors (innovativeness, .03, p < .01; production capability, .03, p < .01; and human capital,
.04, p < .01), implying that firms’ improvements on these can lead to enhanced firm
productivity, supporting Hypothesis 1b, Hypothesis 2b, and Hypothesis 3b, respectively.
More importantly, we find that the effect of export on productivity fades when the pro-
posed three mediators are included in the Model 6, which means LBE effects can be
largely accounted for by the mediation mechanisms (see details on statistical tests in the
next section).
As the diagnostic statistics at the bottom of Table 2 reveal, the Hansen J statistic of all
estimation equations do not reject the null hypothesis of no misspecification, and all of the
estimations pass Arellano-Bond AR(1) and AR(2) tests, suggesting the validity of the moment
conditions adopted in GMM estimation.
Mediating Effects
We use two tests to examine the mediation effects. Baron and Kenny (1986) proposed
three necessary conditions for the presence of a mediation effect. The mediation effect exists
when one can establish, first, that the key variable (export) affects the dependent variable
(productivity); second, that the key variable influences the three proposed mediators (inno-
vativeness, production capability, and human capital); and third, that the proposed mediators
affect the dependent variable (productivity) after controlling for the influence of the key vari-
able (export). In other words, despite the potential direct effect of the key variable (export)
on dependent variable (productivity), there is also an indirect effect of the key variable
(export) on the dependent variable (productivity) through the mediator(s). The results shown
in Table 2 satisfy all three conditions. Therefore Hypothesis 1c, Hypothesis 2c, and Hypothesis
3c are supported.
There are other statistical methods to test for mediation effects, such as using the differ-
ence in the coefficients or the product of coefficients, and most of these methods yield
similar conclusions. Due to the fact that the product approach has a higher statistical power
while maintaining acceptable control over the Type I error rate (Preacher & Hayes, 2008),
we further adopted the Sobel (1982) test for the mediation effect. The results of the mediat-
ing effect tests are shown in Table 3. The mediation effects of the three mediators are all
statistically significant. Hence, the results of the Sobel test provide further support for
Hypothesis 1c (Z = 8.52, p < .01), Hypothesis 2c (Z = 5.31, p < .01), and Hypothesis 3c
(Z = 5.79, p < .01). We also calculated the effect ratio for each of the three mediators.
According to Jose (2008), it is a full mediation when the effect ratio is larger than 0.8;
otherwise, it is a partial mediation. As such, all three mediators demonstrate partial media-
tion effects: innovativeness with effect ratio of .11; production capability, .09; and human
capital, .15.
Moderating Effects: SOEs Versus Non-SOEs

We further examine the differential learning mechanisms for SOEs versus non-SOEs.
Although we have employed the GMM estimator approach to address the potential selection
Table 3
Sobel (1982) Test of Mediation Effect
Mediator c a σa b σb Z Effect Ratio
Innovativeness .03 .09 .01 .03 .00 8.52*** .11

Production capability .03 .07 .01 .03 .00 5.31*** .09
Human capital .03 .09 .00 .04 .01 5.79*** .15
Note: Z = a × b / a 2σb2 + b 2σa2 ; effect ratio = a × b / c; where a is the effect of export on each mediator; b is the
effect of each mediator on productivity; and c is the effect of export on productivity.
***p < .01 (two-tailed).
Table 4
GMM Estimation Results: SOE Versus Non-SOEs
Ownership Type
Model Dependent Variable Independent Variable SOEs Non-SOEs
Model 1 Productivity Lag export .05*** (.01) .02*** (.00)

Model 2 Productivity Innovativeness .04*** (.00) .04*** (.00)
Production capability .04*** (.00) .03*** (.00)
Human capital .05*** (.01) .04*** (.01)
Model 3 Innovativeness Lag export .19*** (.01) .03*** (.01)
Model 4 Production capability Lag export .02 (.01) .14*** (.01)
Model 5 Human capital Lag export .01 (.01) .20*** (.01)
Model 6 Productivity Lag export .05*** (.01) .00 (.00)
Innovativeness .04*** (.00) .04*** (.00)
Production capability .04*** (.00) .03*** (.00)
Human capital .05*** (.01) .04*** (.01)
Number of observations 74,927 660,199
Note: Estimates for control variables are omitted. Standard errors listed in parentheses. AR(1) and AR(2) denote
Arellano-Bond test for autocorrelation of order 1 and order 2, respectively. Hansen J, AR(1), and AR(2) tests passed
for all estimations. The number of instrumental variables is significantly smaller than the number of firms in the
GMM estimation of each model. GMM = generalized method of moments; SOE = state-owned enterprise.
issue of exporters, this issue is especially serious for SOEs because SOEs may have weaker
incentives to become efficient, and their foreign expansion may reflect a selection among the
more and less efficient SOEs, where the former would be more likely to export. Leaving this
issue unsolved will cause estimation bias and probably underestimate the learning effects of
SOEs from the export market. We thus further employed Heckman’s (1979) two-step estima-
tor to correct for the selection bias existing in the SOEs sample.5 The results are reported in
Table 4 and Table 5. Table 4 summarizes the estimates of key variables in the above six
models for SOEs and non-SOEs. For SOEs, using the three mediation rules by Baron and
Kenny (1986), we conclude that there is learning through innovativeness (.19, p < .01) but
Table 5
Sobel (1982) Test of Mediation Effects: SOEs Versus Non-SOEs
Ownership Type
Mediator SOEs Non-SOEs
Innovativeness
Z 9.05*** 5.12***
Effect ratio 0.15 0.06
Production capability
Z 1.32 7.43***
Effect ratio ns 0.13
Human capital
Z 1.53 7.21***
Effect ratio ns 0.26
Note: Z = a × b / a 2σ2 + b 2σa2 ; effect ratio = a × b / c. SOE = state-owned enterprise.

b
not through production capability (.02, p > .1) and human capital (.01, p > .1). This is because
exporting does not have a significant and positive influence on production capability and
human capital as shown in Model 4 and Model 5, failing to satisfy the second mediation
condition (Baron & Kenny, 1986). In comparison, non-SOEs learn from all three sources.
This supports Hypothesis 4. In Table 5, we present the results of the Sobel (1982) test for
mediation effects and find consistent results.
Moderating Effects: Industry Differences

We performed additional tests to examine differential learning mechanisms for industries
varying in export intensity and NPD intensity. The results are reported in Tables 6 through 9.
Export intensity. Table 6 summarizes the estimates of key variables in the above six mod-
els for industries with low, medium, and high export intensity. For industries with low export
intensity, using the rules by Baron and Kenny (1986), we conclude that there is no learning
from exporting because the main effect of exporting on productivity is not significant (.00,
p > .1) in Model 1, failing to support the first mediation condition (Baron & Kenny, 1986).
For industries with high export intensity, the learning by exporting effect is weak because
firms complete only one of the three channels (i.e., human capital; .12, p < .01) proposed. As
for industries with medium export intensity, there is learning through all three mechanisms.
This is in support of Hypothesis 5. In Table 7, we also report the results of the Sobel (1982)
test for mediation effects and also find consistent results.
NPD intensity. Similarly, Table 8 summarizes the estimates of key variables in the

above six models for industries with low, medium, and high NPD intensity. For industries
with low NPD intensity, we conclude that there is no learning through all three proposed
mechanisms. This is because the positive relationships between exporting and three channels
Table 6
Estimation Results: Industries Varying in Export Intensity
Export Intensity
Model Dependent Variable Independent Variable Low Medium High
Model 1 Productivity Lag export .00 .02*** .03***

(.01) (.00) (.00)
Model 2 Productivity Innovativeness .02*** .03*** .04***
(.00) (.00) (.00)
Production capability .03*** .02*** .04***
(.00) (.00) (.00)
Human capital .03*** .04*** .04***
(.01) (.01) (.01)
Model 3 Innovativeness Lag export .01 .09*** .00
(.03) (.01) (.01)
Model 4 Production capability Lag export .03 .08*** .02
(.03) (.01) (.02)
Model 5 Human capital Lag export .06*** .07*** .12***
(.01) (.00) (.01)
Model 6 Productivity Lag export .00 .00* .03***
(.01) (.00) (.00)
Innovativeness .02*** .03*** .04***
(.00) (.00) (.00)
Production capability .03*** .02*** .04***
(.00) (.00) (.00)
Human capital .03*** .04*** .04***
(.01) (.01) (.01)
Number of observations 142,529 435,395 157,202
generalized method of moments estimation of each model.
*p < .10.
(i.e., innovativeness, production capability, and human capital) are all not statistically signifi-
cant, as shown in Models 3 through 5, failing to pass the second mediation condition (Baron
& Kenny, 1986). In comparison, firms with medium and high levels of NPD intensity learn
from all of the proposed mechanisms. This is in support of Hypothesis 6. Table 9 also reports
the results of the Sobel (1982) test for mediation effects which are consistent.
Discussion
Despite the ample evidence that exporting leads to significant productivity gains, the
mechanism of “learning” that links the two ends of the causal relationship remains largely
unexamined (Castellani, 2002; Silva et al., 2012). Drawing from the theories in
Table 7
Sobel (1982) Test of Mediation Effects: Industries Varying in Export Intensity
Export Intensity
Mediator Low Medium High
Innovativeness
Z NA 7.82*** 0.25
Effect ratio NA 0.14 ns
Z NA 4.99*** 1.11
Effect ratio NA 0.06 ns
Human capital
Z NA 6.38*** 5.15***
Effect ratio NA 0.13 0.12
Note: Z = a × b / a 2σ2 + b 2σa2 ; effect ratio = a × b / c. NA = not applicable, because there is no learning effect
b
based on the nonsignificant effect of export on productivity.
international business and strategy, we postulated that the learning mechanisms underlying
the LBE effect are multifaceted based on the tenets presented in the organizational learning
literature (Dierkes et al., 2003; Huber, 1991). We conceptualize that there are strategic
decisions pertinent to firm innovativeness, production capability, and human capital that
leverage the knowledge and resources obtained from exporting to achieve productivity
gains. Specifically, we argue that it is not exporting activity itself that is important in posi-
tively driving productivity but some firm-level strategic decisions that are crucial in actu-
alizing the value of knowledge and resources obtained from exporting for productivity
gain. Our unique data and rigorous statistical approach allow us to control for alternative
explanations (i.e., self-selection) for the LBE effect and show that learning leading to
increased productivity does in fact occur in exporting firms. As we have proven in our
analyses, it is necessary for exporters to rely on innovativeness, production capability, and
human capital, which are mediating conduits that facilitate the leveraging of export bene-
fits into productivity gains. Thus, our research makes a salient contribution to the literature
by “opening the black box” on what exactly is the LBE effect. To enrich our contribution,
our study further demonstrates that there is heterogeneity in the underlying learning mech-
anisms with respect to the different ownership types as well as industry-level differences
in export intensity and NPD intensity. Our results show that non-SOE firms and firms in
industries of medium export intensity and medium and high NPD intensity benefit the most
from the LBE effect.
Contributions to Literature
Because the mastery of the complete learning process is rare and challenging (Day,
1994) due to a lack of conceptual development and data availability, how exporting firms
facilitate, instrument, and manage the learning process through exporting remains a set of
Table 8
Estimation Results: Industries Varying in New Product Development (NPD) Intensity
NPD Intensity
Model Dependent Variable Independent Variable Low Medium High
Model 1 Productivity Lag export 0.01*** 0.03*** 0.02***

(0.00) (0.00) (0.00)
Model 2 Productivity Innovativeness 0.03*** 0.04*** 0.04***
(0.00) (0.00) (0.00)
Production capability 0.03*** 0.03*** 0.04***
(0.00) (0.00) (0.00)
Human capital 0.02*** 0.03*** 0.06***
(0.01) (0.01) (0.01)
Model 3 Innovativeness Lag export 0.02 0.06*** 0.10***
(0.02) (0.01) (0.01)
Model 4 Production capability Lag export 0.02 0.06*** 0.08***
(0.03) (0.01) (0.02)
Model 5 Human capital Lag export 0.02 0.10*** 0.11***
(0.01) (0.01) (0.01)
Model 6 Productivity Lag export 0.01** 0.00* 0.01
(0.01) (0.00) (0.00)
Innovativeness 0.03*** 0.03*** 0.04***
(0.00) (0.00) (0.00)
Production capability 0.03*** 0.03*** 0.04***
(0.00) (0.00) (0.00)
Human capital 0.02*** 0.03*** 0.06***
(0.01) (0.01) (0.01)
Number of observations 151,913 432,143 144,823
generalized method of moments estimation of each model.
*p < .10.
**p < .05.
***p < .01 (all two-tailed tests).
core unknowns. Differentiating from extant research in this stream, this study thus exam-
ines the core linkage between exporting and firm productivity at greater depth, uncovering
the underlying learning mechanisms that capture how a firm’s strategic actions mediate the
relationship between exporting and productivity gain. Exporting grants a firm access to
unique experiential knowledge and technical resources. However, securing superior
knowledge and resources constructs only a necessary but insufficient condition for produc-
tivity gains. It is critical for a firm to leverage these endowments (Sirmon et al., 2007).
Thus, we conceptualized and empirically validated that it is not exporting activity itself
that is important in positively driving productivity but relevant firm-level strategic deci-
sions that are crucial in actualizing the value of knowledge and resources obtained from
exporting, that is, a greater focus on firm innovation, improving production capabilities,
and enhancing human capital.
Table 9
Sobel (1982) Test of Mediation Effects: Industries Varying in New Product
Development (NPD) Intensity
NPD Intensity
Mediator Low Medium High
Innovativeness
Z 0.82 6.54*** 6.67***
Effect ratio ns 0.07 0.17
Z 0.79 3.95*** 4.02***
Human capital
Z 1.29 4.44*** 6.61***
Note: Z = a × b / a 2σ2 + b 2σa2 ; effect ratio = a × b / c.

b
Our study significantly extends the LBE theory in multiple aspects. First, we lead this
stream of research by proposing a mediation model to uncover the underlying learning behind
LBE. Our study opens a new extended area of research to deepen the exploration of organi-
zational learning from exporting, considering the fact that extant LBE research has predomi-
nantly focused solely on the direct relationship between exporting and productivity, and the
mechanism of “learning” remains an oft-discussed topic (Castellani, 2002). Second, we
incorporate exploration, exploitation, and human capital perspectives to build and operation-
alize a multimediation framework that covers firm strategic decisions from different domain.
We theorize that strategic decisions with regard to innovativeness, production capabilities,
and human capital leverage the knowledge and resources obtained from exporting behavior
to achieve productivity gains for exporting firms. For the learning channels, we argue that
firms rely on innovativeness to facilitate explorative learning, production capability improve-
ment to fulfill exploitative learning, and enhancement of human capital to increase firm
managerial efficiency. Combining the concurrent understanding on organizational learning
and international knowledge transfer (Fiol & Lyles, 1985; Salomon, 2006) with the results
from this study, we are confident that productivity gains are triggered not directly by the
exporting behavior itself but instead by the effective acquisition, flow, absorption, and con-
version of the knowledge and experience accumulated from exporting through these three
mediation mechanisms. Last, our study further enriches LBE theory with our examination of
the moderating role of state ownership, as well as industry heterogeneity factors, on the
effectiveness of the multimediation LBE mechanism.
Implications for Managers

Firm-level findings from our study highlight the importance of firm strategic management
in facilitating the learning for exporters and offer a number of strategic insights to firm
managers. First, we establish that exporting, in and of itself, does not automatically drive
greater productivity and performance. Exporting exposes firms to new knowledge, but it is
up to the firm to strategically decide how to absorb, leverage, and incorporate this new
knowledge within the organization. Firms that exhibit learning are those that are the most
adept at their own organizational processes and that can fully explore, exploit, and efficiently
integrate the benefits of their international experience (Zahra & George, 2002). More specifi-
cally, our multifaceted learning model suggests that productivity gains can be achieved
through three types of carefully designed strategic decisions (innovativeness, production
capability improvement, and human capital enhancement) and that learning capabilities are
dynamic (Teece, Pisano, & Shuen, 1997). The three mediating mechanisms are in themselves
high-level managerial strategies requiring different resource sets and top management atten-
tion. Our findings further quantify the effectiveness of three mediations and provide guid-
ance on how to optimize resource allocation to enhance the mediated LBE. Human capital
enhancement is found to have the strongest mediation effect to facilitate learning, followed
by innovativeness, with production capability improvement being the weakest of the three.
Depending on the effectiveness of each learning mechanism and the availability of resources,
a firm’s top management can assess the potential trade-offs between these learning mecha-
nisms, deciding which mechanism or combination would be most beneficial to the firm’s
international activities or overall productivity. This provides guidance for firms to strengthen
their strategic orientation and efficient allocation of valuable resources.
Implications for Policy Makers

Our study also has implications for policy makers. First, although on the surface there
appears to be a positive relationship between exporting and firm productivity, merely stimu-
lating exporting at a policy level may be an ineffective solution to improve firm productivity
and competitiveness in industries. Knowledge and experience obtained with globalization
needs to be internalized and recombined before it can be transformed into performance. This
calls for attention to the three strategic decisions we proposed for facilitating the learning
process. Second, based on the finding that innovative industries with a higher rate of NPD
learn more effectively from exporting through all three mediation channels, more should be
done to combine the encouraging of innovation with the improvement of firms’/industries’
absorptive capacity at the industry level. Government policies that subsidize and reward
investment in innovation (such as China’s recent indigenous innovation policy) may be
effective not only in boosting domestic innovation but in spurring LBE effects at both the
firm and industry levels. To effectuate the learning of exporters, more guidance should be
given for highly innovative industries to encourage investment into the three business strate-
gies, as opposed to industries with a low level of innovativeness. Third, special attention
should be given to export-intensive industries. Governments in emerging economies typi-
cally design policies that favor these industries by offering solutions to soft budget con-
straints, such as special loans, subsidies, tax benefits, and so on. Due to the diminishing LBE
effect, only human capital enhancement appears effective in facilitating learning. As such,
governments may deploy resources in helping these industries to upgrade human resources,
at the same time continuing to provide full support on innovation, production capacity
improvement, and human capital enhancement for industries with moderate export intensity.
Last, our findings with respect to SOEs reveal a misalignment of SOE exporters’ operational
objectives with managers’ strategic focus. To facilitate LBE, policy makers should pay more
attention to monitoring SOEs’ strategic decisions with regard to their learning efficiency.
Specifically, the overinvestment of SOEs in head count, equipment, property, and buildings
for production improvement needs to be scrutinized, while investment in innovation should
be prioritized to facilitate LBE.
In sum, our study starts from a well-studied phenomenon, contributes with a new theoreti-
cal model, and ends with meaningful findings for managers and policy makers. It serves as a
dynamic and effective extension for the underdeveloped theory on LBE.
Limitations and Future Research Directions

Like others, this study has a few caveats that invite future research efforts. First, the con-
cern of estimation bias due to the causal relationship of productivity affecting exporting is
mitigated in our study, as we adjusted our model specification (e.g., adding lagged terms of
the dependent variables) to control for potential dynamics caused by this possible reverse
causality. Despite this, we acknowledge that our study may not thoroughly rule out this con-
cern. Second, we have identified three learning mechanisms pertinent to the LBE effect. It is
possible that other core processes (e.g., resource alignment) may also mediate a firm’s pro-
ductivity gain. Third, we proposed that it is not the exporting behavior itself but that instead,
it is the accumulated experience and knowledge obtained from exporting that lead to produc-
tivity enhancement. By acquiring measures of the exact contents of experience and knowl-
edge, the details of the learning process can be examined. Therefore, it would be useful to
validate the relevant explanations through executive surveys in a future study. Fourth, our
study has limitations due to data availability and study context. We do not theorize and test
all conventional wisdom on knowledge and learning, such as examining possible knowledge
depreciation effects (Argote, 1999). Also, besides export intensity and NPD intensity, other
industry characteristics (e.g., competitive intensity) may also moderate the LBE effect.
Future research may examine these domains. Last, we empirically test our model among
Chinese firms. While China may be an exemplary country among emerging market econo-
mies, the generalizability of our results can be further established through future studies in
different contexts.
Notes
1. Self-selection is an alternative explanation to the positive relationship between export activity and produc-
tivity, positing that firms need to overcome thresholds with regard to extra costs for logistics, product, and market
adaptation before “self-selecting” into export markets. Thus exporting can be attributed to these firms’ already
having high levels of productivity/efficiency as well as innovativeness, production capability, or human capital
(Bernard & Jensen, 1999; Wagner, 2007). Despite this, like many other studies within this stream, we focus on the
learning-by-exporting relationship of the opposite causal direction because it is of potentially great strategic interest
(Salomon & Jin, 2010). To test for mediation effects, we face the challenge to rule out the alternative explanation of
self-selection. However, “self-selection” is likely less of a concern in our study context, because we include lagged
values of the dependent variables as well as a lagged exporting measure in each of our study equations. These lagged
terms are able to effectively control for the dynamics caused by potential self-selection (Salomon & Jin, 2010). In
this way, the continuous measure of our exporting variable allows us to test the marginal change effect of exporting
intensity on the three mediators and subsequent productivity. For more details on this, please refer to our estimation
method described in the identification strategy part and the estimation results in Table 4. We thank an anonymous
reviewer for raising this important issue on self-selection.
2. We also used new product development (NPD) as an alternative output measure of innovativeness and
obtained consistent results. These results are available upon request.
3. Some industries, like shipbuilding, may have an unusually higher proportion of new product in their total
output than do other industries, which raises a concern on the validity of NPD intensity in capturing industry-level
innovativeness. As a robustness check, we used industry research and development (R&D) intensity as an alterna-
tive input measure of innovativeness. The results are consistent and available upon request.
4. Our current analyses do not directly model knowledge depreciation (Argote, 1999). However, the inclusion
of lagged productivity and lagged export to predict current productivity indirectly formulates the diminishing lag-
ging effects of past exporting (beyond one time lag) on current productivity. Besides accounting for potential self-
selection bias (as noted in note 1), this lag structure of our model may partially control for the effect of knowledge
depreciation.
5. Specifically, at the first stage, we run a probit regression to estimate the export decision by state-owned
enterprises (SOEs; 1 if export, otherwise 0). The regressors include lagged terms of firm productivity, production
capability, R&D, human capital, firm size, age, and so on. We then obtain the inverse Mills ratio, γ = ϕ(Zr) / φ(Zr), for
all SOEs, where Zr is the sum of each variable evaluated at its mean value multiplied by its marginal effects obtained
from the probit regression. Next, in the second stage, we incorporate γ into the generalized method of moments
estimation framework as an additional control for potential selection bias.
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A Multimediation Model of Learning by Exporting: Analysis

Article in Journal of Management · February 2017

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A Multimediation Model of Learning by

Keywords: organizational learning; export performance; innovation management; exploita-

First, a multimediation model better fits the multidimensionality of knowledge (Huber,

capability improvement, and enhancement of human capital. By verifying the significance

Theory and Hypothesis Development

Black Box of Learning-By-Exporting

Exporting Production Capability Productivity

enhancement) for exporters to leverage their foreign-acquired knowledge and various

Productivity Gain Through Firm Innovativeness

Hypothesis 1a: Greater exporting is positively associated with firm innovativeness.

Productivity Gain Through Production Capability Improvement

Productivity Gain Through Human Capital Enhancement

Effects of Ownership and Industry Heterogeneity on LBE Mechanisms

Learning Between SOEs and Non-SOEs

Learning in Industries of Different Export Intensities

Learning in Industries of Different NPD Intensities

Data and Variables

Firm innovativeness. We measure firm innovativeness by using a firm’s expenditures

Production capability. We compute a firm’s capital investment (log-transformed) as

Capital Stocki,t = (Capital Stocki,t−1 – Value of Depreciationi,t−1) + Capital Investmenti,t. (1)

Number of employees. Similarly, we use log-transformed number of employees to control

Subsidies. For firms potentially engaged in an exporting business, special treatment,

NPD intensity. NPD, as an outcome measure of innovativeness (Sengupta, 1998), char-

Next, we study exporting’s effect on three such proposed mediators as

Innovativenessit = β30 + β31 × Innovativenessi ,t −1 + β32 × Export i ,t −1 + β34

Production Capability Improvement it = β40 + β41 × Production Capability Improvement i ,t −1

Human Capital it = β 50 + β 51 × Human Capital i ,t −1+ β 52 × Export i ,t −1+ β 53 × Innovativenessit + β 54

Last, we model the mediators’ effect on productivity after controlling exporting as

Productivity it = β60 + β61 × Productivity i ,t −1+ β62 × Export i ,t −1

Regression Results: Main Effects

Note: N = 735,126. All correlations are significant at the 1% level.

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Lag export .03*** .09*** .07*** .09*** .01

Moderating Effects: SOEs Versus Non-SOEs

Mediator c a σa b σb Z Effect Ratio

Innovativeness .03 .09 .01 .03 .00 8.52*** .11

Model Dependent Variable Independent Variable SOEs Non-SOEs

Model 1 Productivity Lag export .05*** (.01) .02*** (.00)

Mediator SOEs Non-SOEs

Note: Z = a × b / a 2σ2 + b 2σa2 ; effect ratio = a × b / c. SOE = state-owned enterprise.

Moderating Effects: Industry Differences

NPD intensity. Similarly, Table 8 summarizes the estimates of key variables in the

Model Dependent Variable Independent Variable Low Medium High

Model 1 Productivity Lag export .00 .02*** .03***

Mediator Low Medium High

Model Dependent Variable Independent Variable Low Medium High

Model 1 Productivity Lag export 0.01*** 0.03*** 0.02***

Mediator Low Medium High

Note: Z = a × b / a 2σ2 + b 2σa2 ; effect ratio = a × b / c.

Implications for Managers

Implications for Policy Makers

Limitations and Future Research Directions

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Lag export .03* .09* .07* .09* .01

Model 1 Productivity Lag export .05* (.01) .02* (.00)

Model 1 Productivity Lag export .00 .02* .03*

Model 1 Productivity Lag export 0.01* 0.03* 0.02***