This thesis investigates whether Chinese firms improve their productivity through export and why this is the case; whether export and R&D investment have a complementary effect on improving firm performance; how to identify the dynamics of technological capabilities for a large group of firms and how different channels of foreign technology influence the transitions of firms in Central Asia and Eastern Europe. The evidence in chapter 2 does not support that export leads to higher productivity for manufacturing firms in China. However, in order to penetrate the international market, firms conduct more product innovations when foreign sales are initiated. The failure of exporters to increase their productivity can be explained by their prominent usage of labor and by a lack of R&D investment in absorbing advanced technology. Using Chinese firm-level data, chapter 3 documents a systematic difference in the decision of firms to export across labor- and capital-intensive sectors; a self-selectivity by more productive firms to conduct R&D across all sectors; the lower productivity of R&D starters among exporters than their non-exporting counterparts; the positive effect of export on the odds to invest in R&D and vice versa; a complementary relationship between conducting R&D and exporting in improving firm productivity. These findings can be demonstrated by a theoretical model incorporating factor endowments and the decision of firms to invest R&D into Melitz’s (2003) model. The latent transition model proposed in chapter 4 identifies three sequential stages throughout the development of technological capabilities for firms in Central Asia and Eastern Europe: from the experience-based, to the search-based, and then to the research-based level. The direct sources of foreign technology (licenses, imports, and FDI) play more important roles in the transition of firms in terms of technological capabilities, while the indirect source (export) does not show a significant effect.