Reciprocal Relationship between Innovation and Exports in SME’s: Application of Multiple Correspondence Analysis and Generalized Structural Equation Model

The main objective of this study was to investigate the reciprocal relationship between innovation and exports in small and medium-sized enterprises (SME’s). The statistical population of this research is the SME’s of West Azarbaijan province. The analyzes of this research are based on a questionnaire derived from the IDEIS project entitled the process of innovation in French’s small and medium-sized firms, which was changed and adopted in accordance with the conditions of Iran and the existing export barriers. The questionnaire have been completed from September 2016 to April 2017, addressing the managers of small and medium enterprises of West Azarbaijan Province. To this end, the intensity of input and output innovation were calculated using Multiple Correspondence Analysis (MCA) and then the econometric model was estimated using the Generalized Structural Equation Model (GSEM). The results show that the effect of exports on innovation is positive and significant, but on the contrary, the effect of innovation on exports is negative which indicates that the level of innovation of Iranian firms is small. Also, the barriers to exports index has a negative effect on firms' exports. According to the results, the learning effect of exports on SME’s is evident. In this regard, the government must support export-oriented measures, such as marketing for new products, as well as finding new export markets, providing export subsidies which will increase exports.