The Effect of Exporting on Creative Destruction and a Plant's Average Product Characteristics in Japan and Korea

Abstract

This paper examines whether exporting activity contributes to the promotion of creative destruction and the upgrading of a plant's product portfolio. We first present evidence that exporters tend to produce, on average, products with higher attributes than non-exporters. Next, we find evidence that exporting improves a plant's average product attributes, utilizing the propensity score difference-in-difference matching technique. Further examination of the mechanism reveals that the positive effect of exporting on a plant's average product attributes is more likely to be realized through its effect of adding higher-attribute products, a key feature of creative destruction within a firm, rather than through share changes among continuously produced products. The results suggest that exporting might have contributed to the sustained economic growth of Japan and Korea by promoting creative destruction. © 2020 Institute of Developing Economies