Export Starters And Exiters: Do Innovation And Finance Matter?

Using European Central Bank restricted-access biannual data on European small-and medium-sized en-terprises (SMEs) over the period 2014-2017, we analyze the impact that innovation, financial constraints, and an efficient regulatory environment exert on the probability of switching from the status of nonex-porter to exporter and vice versa . We find that either the use of finance for innovation or undertaking product innovation increases the likelihood of starting to export and lowers the likelihood of stopping exporting. Although SMEs' financial frictions are negligible for foreign market entry, they matter for in-creasing the probability of exiting. We also document that a friendly regulatory environment is conducive to start-but not to stop-exporting. Our findings provide empirical support for the recent European Com-mission policies on both SMEs' internationalization and access to finance.(c) 2020 Elsevier B.V. All rights reserved.