Abstract
Facing an unprecedented and turbulent environment, market and non-market actors attempt to align purposefully and efficiently their strategy and resource allocations. This paper asks how firms’ export strategies react to institutional support via innovation. Based on a novel and rich longitude dataset of SMEs covering 2006-2018, first, we examine how government subsidies trigger firms’ innovation performance, i.e., investment in research and development (R&D). Second, by further distinguishing private R&D and policy-induced R&D, we compare the mediation role of firms’ R&D in their export strategies regarding the export decision, product diversification, market diversification, and export value. Our empirical results evaluate the effectiveness and efficiency of government subsidies and contribute to understanding how institutional factors affect innovation and export performance at the firm level. This study provides implications for policymakers on which and how institutions can best equip their home-grown businesses to succeed in the international markets.