Export, Innovation And Markup

A large number of empirical literatures in International Trade study have proved a fact that exporters are superior to non-exporters in many aspects, such as scale, cap-ital intensity, wages and productivity (Bernard & Jensen,1995). However, compared with the study of productivity, the research about the relationship between export and markup is much less. Early models didn’t take price discrimination into consideration, and therefore the study on markup is not much. In recent years, with a lot of micro enterprise data acquisition and continuous innovation of measurement method, it has caught the attention of the academia, often used in the study of industrial organization and international trade, examining various types of competition and the influence of trade policy on market forces.Markup reflects the pricing power based on marginal cost, and is related to the firm’s ability to influence the market price and the market monopoly power. Main-taining high markup is a reflection of dynamic competitive ability. Due to the differe-nent competition in domestic and international market, exporters usually adopt with different pricing strategies (De Loecker & Warzynski,2012). According to Heteroge-neous Enterprise Trade Theory, with stronger competitive ability and cost advantage, more efficient firms may charge lower price, which means their markups are lower. So, whose markup is higher, exporters or non-exporters? And for what reason?This paper focuses on the impact of export on markup, and mainly discusses the following questions:firstly, does export have impact on markup, if so, how much is the impact and through which way? Could innovation affect the impact? Secondly, is the markup of exporters higher than that of non-exporters? Is the difference universal in different regions, industries and forms of ownership? Judgment and research on these issues can not only make up the research on the effect of export, but also pro-vide clear implications for the government to make policy, improve export perfor-mance and enterprise competitiveness.Specifically, we first summarize the related literature from three viewpoints, that is, export and markup, export and innovation, as well as the triadic relationships, which is also one of the breakthroughs of this paper. Secondly, after comprehensive theoretical and empirical analysis, we put forward the mechanism through which ex-port may influence markup. Thirdly, according to De Loecker and Warzynsik (2012), we estimate markup of China’s industrial enterprises from 1998 to 2007 except 2004. We analyze markup difference between exporters and non-exporters, innovators and non-innovators (from 2005 to 2007), and then reconsider it in different regions, in-dustries and forms of ownership. Finally, we test the influence of export on markup, including the overall analysis, the mediation effect of innovation, and the overall ef-fect. In particular, in order to get a more accurate markup gap, after eliminating the processing enterprises we use Propensity Score Matching to further study the role of innovation.The empirical study shows that exporters’ markup is lower than non-exporters’in China, and is universal not only in the overall sample, but also in different industries, regions, and forms of ownership. Part of the markup gap can be explained by the processing trade. If export status or export intensity increase by one unit, markup will decrease respectively by 0.040 units and 0.096 units. Innovation investment can in-crease markup to a certain extent, but the effect is relatively weak and unable to offset the negative impact of export. For exporters, comprehensive influence of export and innovation on markup is negative. The mediation effect of innovation caused by ex-port is 0.005.