Export Behavior and Firm Productivity in German Manufacturing: A Firm-Level Analysis

This paper examines the causal relationship between productivity and exporting in German manufacturing. We find a causal link from high productivity to presence in foreign markets, as postulated by a recent literature on international trade with heterogeneous firms. We apply a matching technique in order to analyze whether the presence in international markets enables firms to achieve further productivity improvements, without finding significant evidence for this. We conclude that high-productivity firms self-select themselves into export markets, while exporting itself does not play a significant role for the productivity of German firms. JEL no. F10, F13, F14, D21, L60     

The U-Shaped Productivity Dynamics of French Exporters

We use data on French manufacturing firms to reveal that the productivity dynamics of new exporters is typically U-shaped. Prior to entry, firm productivity temporarily decreases, then recovers contemporaneously with entry, as the benefits from sales to foreign markets accrue. We show that the U-shaped pattern is more pronounced for intensively exporting firms and for firms operating in capital-intensive or high-technology sectors. This finding suggests that firms prepare to become exporters through prior specific investments and learning-to-export mechanisms. We then point to the limitations of studies that focus only on date of entry to exporting to discriminate between self-selection versus learning mechanisms. JEL no.  F10, F14, L60     

Firm Productivity and Mode of Foreign Expansion: Evidence from Taiwanese Manufacturing Firms

This paper builds on the recent literature on firm heterogeneity in international trade and foreign direct investment (FDI), and aims to empirically examine how firm productivity affects a firm’s foreign market entry strategy beyond the simple binary choice between exporting and FDI. Utilizing the panel data of Taiwanese manufacturing firms during 2002–2012, we further classify FDI methods by whole ownership or a joint venture to investigate a firm’s foreign expansion decision. By performing Kolmogorov–Smirnov (KS) tests, we find that if a firm is more productive, it is more likely to choose FDI rather than exporting. However, productivity of firms choosing whole ownership is not so different from choosing a joint venture. Furthermore, a more productive firm is more likely to conduct both whole ownership of the foreign subsidiary and a joint venture formation in the case of FDI.     

Is Exporting a Source of Productivity Spillovers?

This paper investigates whether exporting generates positive productivity spillover effects on other plants in the same industry and on plants in vertically related industries. Using data for Chilean manufacturing plants from 1990 to 1999, we find strong evidence that domestic as well as foreign-owned exporting plants improve productivity of local suppliers. We also find some evidence of horizontal spillovers from exporting but these are mainly generated by plants with foreign ownership. These results suggest that positive productivity spillovers are not only generated by the presence of foreign-owned exporting plants but also by exporting activity of domestic firms. The results are robust to controls for agglomeration of economic activity, the importance of non-exporting foreign-owned plants, and plant unobserved heterogeneity. JEL no.  F10, F23, O3, O54     

EXPORTING AND PRODUCTIVITY: A FIRM‐LEVEL ANALYSIS OF THE TAIWAN ELECTRONICS INDUSTRY

Based on the panel data of Taiwanese electronics firms, this paper explores the relationship between exporting and productivity. Contemporaneous levels of exports and productivity are indeed positively correlated. The causality tests show causality from productivity to exporting and vice versa, implying that self‐selection and learning‐by‐exporting effects coexist in the Taiwan electronics industry, while the learning‐by‐exporting effect is less supported. Exporting also has a positive impact on the productivity growth of firms, while the effect diminishes gradually after entering foreign markets. Decomposing the productivity growth shows that the reallocation effect accounts for only 20 per cent compared to the own‐effect share of 80 per cent, which is mostly contributed by firms that continually export.     

Financial constraints and foreign direct investment: firm-level evidence

Low productivity is an important barrier to the cross-border expansion of firms. But firms may also need external finance to shoulder the costs of entering foreign markets. We develop a model of multinational firms facing real and financial barriers to foreign direct investment (FDI), and we analyze their impact on the FDI decision. Theoretically, we show that financial constraints can affect highly productive firms more than firms with low productivity because the former are more likely to expand abroad. We provide empirical evidence based on a detailed dataset of German domestic and multinational firms which contains information on parent-level financial constraints as well as on the location the foreign affiliates. We find that financial factors constrain firms’ foreign investment decisions, an effect felt in particular by firms most likely to consider investing abroad. The locational information in our dataset allows exploiting cross-country differences in contract enforcement. Consistent with theory, we find that poor contract enforcement in the host country has a negative impact on FDI decisions.     

Trade regimes and spillover effects of FDI: Evidence from Uruguay

Trade Regimes and Spillover Effects of FDI: Evidence from Uruguay. — This paper examines differences in the character and impact of FDI entering Uruguay during import substitution, pursued until 1973, and the subsequent more outwardoriented trade regime. Regression analysis shows that the labor productivity of local firms is positively related to the presence of older import-substituting MNCs in their industry. The presence of foreign affiliates established after 1973 has no apparent impact on local productivity, but seems to raise the likelihood that local firms engage in exporting. This may be a sign of export spillovers, indicating that local firms may pick up some exportrelated skills from the operations of outward-oriented foreign MNCs.     

Does agglomeration promote internationalization of Chinese firms?

Knowledge spillover from the agglomeration of exporters can reduce the initial costs of exporting faced by other firms and thereby facilitate exports. We use a large dataset of Chinese manufacturing firms to assess whether industrial agglomeration lowers the minimum productivity level required for exporting and whether it increases a firm's probability of exporting. Semi-parametric quantile regressions reveal that the productivity advantage of exporters against non-exporters is markedly smaller in agglomerated regions. Furthermore, a parametric estimation of an export entry model indicates that the agglomeration of incumbent exporters contributes significantly to export participation, although its magnitude is limited. These spillover effects are generated not only by the agglomeration of exporting foreign invested firms (FIFs), but also, more importantly, by that of indigenous Chinese exporters. In fact, the agglomeration of exporting FIFs only contributes to the export entry of FIFs.     

Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007

As with many developing countries, the Chinese government hopes that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In this paper, we show that foreign investment originating outside of Hong Kong, Macau, and Taiwan has positive effects on individual firm level productivity, while foreign investment from HKMT firms does not. We also test for both horizontal (within the same industry) and vertical (upstream or downstream) linkages from foreign investment. Using a manufacturing firm-level panel for 1998 through 2007, we find zero or weak positive horizontal externalities. However, our results show that foreign direct investment (FDI) has generated positive productivity spillovers to domestic firms via backward linkages (the contacts between foreign affiliates and their local suppliers in downstream sectors) as well as forward linkages (between foreign suppliers and their local buyers in the upstream sectors).     

Do Exporting Firms Pay Higher Wages? Evidence from Kenya's Manufacturing Sector

Abstract: When trade liberalization was first embarked on in Kenya some 20 years ago, a key argument against it was that it would reduce domestic wages, as exporting firms sought to remain competitive versus, for example, the low‐cost Asian countries. A counter argument was that manufactured exports require more elaborate design, supervision, packaging and handling, and thus a more educated labor force than production for the domestic market. To attract such skills, exporting firms would need to pay higher wages than non‐exporting ones. This paper uses data from Kenyan manufacturing to study the impact of trade liberalization on earnings, distinguishing between exporting and non‐exporting firms. In particular, it investigates whether exporting firms paid a wage‐premium to their employees. The study uses manufacturing firm survey data from a World Bank regional project. The study has three important findings: (1) There was a large and significant effect of exporting on wages in the first decade of trade liberalization. During the first half of the 1990s, workers in exporting firms earned up to 30 percent more than those engaged in non‐exporting firms. The results are robust even after controlling for individual and firm‐level characteristics such as employee demographics, productivity, firm location and occupation. (2) After a decade of trade liberalization, exporting ceased to be a significant determinant of wages in Kenyan manufacturing, after controlling for productivity and firm location. (3) During the 2000s, casual or irregular employment became a more common feature of exporting firms. The results suggest that while higher wages were important in attracting skilled labor to exporting firms at the beginning of trade liberalization in the 1990s, domestic competition has since reduced the wage premium. Cost cutting pressures are instead reflected in the substitution of casual and low wage labor for permanent and better educated labor and in increased automation.     

Importers,Exporters and Multinationals: Exploring the Hierarchy of International Linkages

The purpose of this paper is to empirically explore two dimensions of the firm hierarchy of international market-specific linkages, using data on Swedish manufacturing firms from 1997 to 2007. First, we investigate the productivity ordering with respect to three international linkages; importing, exporting and investing abroad. Second, we explore whether differences in the productivity ordering across industries correlates with industry and country characteristics. Our findings support a general productivity hierarchy from importing to exporting and from exporting to investing abroad, as well as from a low to a high number of linkages (measuring the complexity of firms’ international linkages). However, an industry-by-industry examination shows that the hierarchical structure is only generally upheld when it comes to the number of international linkages, while the ordering of import, export and investment linkages does not exhibit the same regularity across industries. Extending the analysis, we find that the lack of a hierarchical structure is more likely in industries focusing on larger and less distant markets.     

Analysis of Productivity Differences among Foreign and Domestic Firms: Evidence from Germany

This paper presents differences in firm-level total factor productivity (TFP) across 22 manufacturing and 17 service industries in Germany over the period 1995–2004. It is an attempt to study whether and to what extent foreign multinational enterprises (MNEs) are more productive relative to German firms. As well as distinguishing between foreign and domestic firms, we also distinguish between German MNEs and domestic firms that do not have any foreign presence. Controlling for endogeneity through semi-parametric techniques, our findings indicate considerable heterogeneity in firm performance across types of firms. The foreign/domestic distinction is not as clear cut as has been suggested elsewhere; multinationality is important in explaining productivity differences rather than foreignness. JEL no. D24, F21, F23     

Technology spillovers from Chinese outward direct investment: The case of Ethiopia

The present study uses firm survey data of 1033 manufacturing firms operating in Ethiopia in 2011 to examine the impact of Chinese outbound direct investment on the productivity of domestic firms. Particularly, we attempt to answer two questions. Firstly, are Chinese-owned (henceforth foreign) firms more productive than local ones? Secondly, does the presence of foreign firms generate technology spillovers on domestic firms operating in the same industry? Our empirical results show that foreign firms are more productive and that their presence has different spillover effects on the productivity of domestic firms. In particular, we find that domestic firms with higher absorptive capacity experience positive spillovers, while those with low absorptive capacity witness negative spillover. We also find that small firms and non-exporting firms benefit more from spillovers than do other types of domestic firms. In this study, instrumental variables are used to address the potential endogeneity between foreign firm presence and domestic firm productivity.     

The impact of exporting on firm productivity: a meta-analysis of the learning-by-exporting hypothesis

We conduct a meta-analysis of more than 30 papers that study the causal relationship between exporting and firm productivity. Our main result, robust to different specifications and to different weights for each observation, indicates that the impact of exporting upon productivity is higher for developing than developed economies. We also find that the export effect tends to be higher (1) in the first year that firms start exporting (compared to later years); and (2) when the sample used in the paper is not restricted to matched firms. Moreover, we find no evidence of publication bias.     

The exporter productivity premium along the productivity distribution: evidence from quantile regression with nonadditive firm fixed effects

A vast literature on the international activities of heterogeneous firms finds the existence of a positive exporter productivity premium. On average, exporting firms are more productive than firms that sell on the national market only. The Melitz (Econometrica 71:1695–1725, 2003) model, however, has implications for not only mean differences but also differences in the distribution of productivity. Furthermore, exporting firms may be different from non-exporting firms for reasons that are not included in the Melitz model. We believe that conditioning on firm fixed effects and studying the distribution of productivity are both necessary for empirical tests of the Melitz model. This paper is the first to employ a new quantile estimation technique for panel data introduced in Powell (Did the economic stimulus payments of 2008 reduce labor supply? Evidence from quantile panel data estimation. RAND Corporation Publications Department, Santa Monica, 2014). We find that the premium is positive at all productivity levels, but highest at the lowest quantiles. These results support theoretical models which suggest that there is a division in productivity between exporters and non-exporters.     

Pollution control and foreign firms’ exit behavior in China

China faces a common dilemma of how to maintain rapid economic growth while also reducing the pollution that has accompanied growth. Will stricter pollution controls drive away the foreign firms that have helped spur growth in China? This paper studies the effects of the Two-Control-Zone (TCZ) pollution control policy on foreign firms’ exit behavior in China. Based on firm-level data from 1998 to 2009, we find that foreign firms’ responses are not significantly different from domestic firms on average once environmental regulations impose an added cost of business. However, foreign firms’ responses to stricter pollution controls tend to differ based on various firm characteristics. Our estimation indicates that larger size, higher productivity and exporting all make foreign firms less likely to exit than similar domestic firms in regions with stricter pollution control.     

Exports versus FDI: do firms use FDI as a mechanism to smooth demand volatility?

In this paper, we first develop a simple two-period model of oligopoly to show that, under demand uncertainty, whether a firm chooses to serve foreign markets by exports or via foreign direct investment (FDI) may depend on demand volatility along with other well-known determinants such as size of market demand and trade costs. Although fast transport such as air shipment is an option for exporting firms to smooth volatile demand in foreign markets, market volatility may systematically trigger the firms to undertake FDI. We then use a rich panel of US firms’ sales to 56 countries between 1999 and 2004 to confront this theoretical prediction and show strong evidence in support of the prediction     

Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach

A recent survey of 54 micro-econometric studies reveals that exporting firms are more productive than non-exporters. However, previous empirical studies show that exporting does not necessarily improve productivity. One possible reason for this result is that most previous studies are restricted to analysing the relationship between a firm’s export status and the growth of its labour productivity, using the firms’ export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. In this paper, we apply the newly developed generalised propensity score (GPS) methodology that allows for continuous treatment, that is, different levels of the firms’ export activities. Using the GPS method and a large panel data set for German manufacturing firms, we estimate the relationship between a firm’s export-sales ratio and its labour productivity growth rate. We find that there is a causal effect of firms’ export activities on labour productivity growth. However, exporting improves labour productivity growth only within a sub-interval of the range of firms’ export-sales ratios. JEL no.  F14, F23, L60     

The impact of ownership,internalization, and entry mode on Japanese subsidiaries’ performance in Brazil

Previous empirical researches on Japanese subsidiaries have found that wholly owned subsidiary (WOS) outperform joint venture (JV). However, these studies considered entry mode selection using a conventional ownership classification of JV, and limited their samples to developed countries and Asian developing countries. This paper examines entry mode based on non-conventional forms of JV, and the impact of ownership and internalization advantages on Japanese subsidiaries’ performance in Brazil. The findings suggest that Japanese–Japanese JV with a partner that has previous experience accumulated in the local market performed better than WOS and Traditional IJV. In addition, ownership and internalization advantages of multinational enterprises have mixed impact on subsidiaries performance.