Does Culture Drive Innovation and Export Quality

Does Culture Drive Innovation and Export Quality -...

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Full Terms & Conditions of access and use can be found at Download by: [Brought to you by Unisa Library] Date: 21 March 2016, At: 04:33 International Economic Journal ISSN: 1016-8737 (Print) 1743-517X (Online) Journal homepage: Does Culture Drive Innovation and Export Quality? Hasan A. Faruq & Michael A. Webb To cite this article: Hasan A. Faruq & Michael A. Webb (2016) Does Culture Drive Innovation and Export Quality?, International Economic Journal, 30:1, 19-38, DOI: 10.1080/10168737.2015.1136667 To link to this article: Published online: 08 Feb 2016. Submit your article to this journal Article views: 10 View related articles View Crossmark data
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INTERNATIONAL ECONOMIC JOURNAL, 2016 VOL. 30, NO. 1, 19–38 Does Culture Drive Innovation and Export Quality? Hasan A. Faruq & Michael A. Webb Economics, Xavier University, Cincinnati, USA ABSTRACT Quality upgrading is important for two reasons: it helps us understand the determinants of trade flows between countries and it promotes economic development. We study the cultural determi- nants of export quality using Hofstede’s four original cultural dimen- sions to provide hypotheses on R&D spending, patents per capita and export quality. We then employ three-stage least squares anal- ysis and confirm our hypotheses. For example, we find uncertainty avoidance encourages small-scale continuous improvement initia- tives and substantially increases export quality. Power distance and individualism increase export quality, while masculinity has a small impact on quality. Finally, we provide implications for understanding the direction of trade and developing policy. ARTICLE HISTORY Received 3 May 2015 Accepted 16 October 2015 KEYWORDS Export quality; innovation; R&D; culture 1. Introduction Economics has a long history of addressing what affects the direction of trade and the types of goods being traded. Recent innovations supplement the comparative advantage theory of trade based on differences in productivity and resources, exploring the effects of external economies of scale and imperfectly competitive markets with heterogeneous goods. Three papers study the effect of cultural affinity on trade: Boisso and Ferrantino ( 1997 ) find that cultural differences between countries have a negative impact on trade, while Guiso, Sapeiza, and Zingales ( 2009 ) find that a higher level of bilateral trust increases trade. Disdier, Tai, Fontagne and Mayer ( 2010 ) use trade intensity in cultural goods as a proxy for the cultural proximity between countries; trade in cultural goods between two countries has a positive impact on overall trade between them. Here our focus is on how a country’s culture affects productivity and international trade. In particular, we ask whether differences in cultural attributes lead to differences in quality upgrading by firms, with consequences for export quality and subsequently trade.
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  • RNA, per capita, uncertainty avoidance, export quality

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