In this article we extend the model developed by Bogliacino and Pianta (2013a, 2013b) on the link between R&D, innovation and economic performance, considering the impact of innovation of export success. We develop a simultaneous three equation model in order to investigate the existence of a virtuous circle? between industries? R&D share of product innovators and export market shares. We investigate empirically at the industry level three key relationships affecting the dynamics of innovation and export performance: first, the capacity of firms to translate their R&D efforts in new products; second, the role of innovation as a determinant of export market shares; third, the export success as a driver of new R&D efforts. The model is tested for 38 manufacturing and service sectors of six European countries over three time periods from 1995 to 2010. The model effectively accounts for the dynamics of R&D efforts, innovation and international performances of European industries. Moreover, important differences across countries emerge when we split our sample in a Northern group Germany, the Netherlands and the United Kingdom and a Southern group France, Italy and Spain. We find that the virtuous circle between innovation and competitiveness holds for Northern economies only, while Southern industries fail to translate innovation efforts into export success.
