Technical progress is the most important engine of economic development in developed European national economies. No other factor contributes more to the generation of prosperity. However, technical progress is however not an exogenous phenomenon, but the result of innovation activities of enterprises, which have to resist a growing intensity of competition on global markets. Innovations and subsequent investments are on the one hand a necessary condition for the competitiveness of German enterprises and long-lasting export success. On the other hand, these innovation activities might also be the result of the export orientation of German industry.

Therefore, two fundamental factors have to be considered in the economic modelling in the context of this project: On the one hand, innovation and export activities are possibly simultaneously determined, i.e. they are presumably interdependent. Consequently, an approach has to be developed, in which export and innovation activities are simultaneously determined. On the other hand, effects of innovation activities usually do not emerge immediately, but are rather of medium or long-term nature, i.e. they show only with time lag. In economic theories such time lags can be modelled by the costs of adjustment of production factors. Beyond that it is to be considered that sunk costs (e.g. information costs on foreign markets, development of a sales network and R&D department) possess high relevance for the export decision as well as regarding decision on innovation activities. This, too, has to be incorporated in the econometric modell. Consideration of dynamic adjustment processes in empirical analysis requires panel data, i.e. observations for an enterprise over several years, and the use of actual methods of panel data econometrics. These approaches must consider that both export and innovation variables have to be treated as endogenous variables to adapt and, thus, have to be adapted suitably.

For the analysis, data of the Mannheimer Innovation Panel stand are available (MIP) and in the service sector (MIP-S). First results of the investigations confirm the great importance of innovation activities for export success of enterprises. On the other hand, the reverse influence of export activity on innovative behavior is not significant. Further important factors are in particular the qualification structure in the enterprise as well as the location of the enterprise.