The quality of a firm's exports: Where you export to matters

What drives export quality? Using Portuguese firm-level data on exports by product and destination market, we find that f.o.b. unit values increase systematically with distance, and tend to be higher in shipments to richer nations. These relationships reflect not only the sorting of firms across markets, but also the within-firm variation of unit values across destinations. Within product categories, higher-productivity firms tend to ship greater quantities at higher prices to a given market, consistent with higher quality. In addition, firm productivity tends to magnify the positive effect of distance on within-product unit values, suggesting that high-productivity, high-quality firms are more able to serve difficult markets.     

The quality of a firm's exports: Where you export to matters

What drives export quality? Using Portuguese firm-level data on exports by product and destination market, we find that f.o.b. unit values increase systematically with distance, and tend to be higher in shipments to richer nations. These relationships reflect not only the sorting of firms across markets, but also the within-firm variation of unit values across destinations. Within product categories, higher-productivity firms tend to ship greater quantities at higher prices to a given market, consistent with higher quality. In addition, firm productivity tends to magnify the positive effect of distance on within-product unit values, suggesting that high-productivity, high-quality firms are more able to serve difficult markets.     

Endogenous firm heterogeneity and the dynamics of trade liberalization

In this paper, we build a dynamic model with endogenous firm-level productivity that involves ex ante identical firms behaving differently in equilibrium. Heterogeneity arises in equilibrium as firms choose different dates to adopt a new technology. We investigate the effects of international trade on technological diffusion and show that trade has a generally positive impact on the equilibrium rate of adoption (and hence on firm-level productivity). In addition, the model can replicate the stylized fact that exporters are larger and more productive than non-exporters. Finally, we show how our model can be used to interpret the emerging empirical evidence on the firm-level productivity effects of CUSFTA.     

进口竞争与企业产品专业化--基于中国多产品企业的研究

本文以企业内部资源配置为视角,检验了进口竞争对企业内部产品专业化的影响。研究发现,进口竞争显著地促进了中国企业的产品专业化程度。进口竞争的加剧促使企业缩小产品生产范围,使其将资源集中到少数核心产品的专业化生产和销售上来。这一过程伴随着企业产品种类的减少和企业整体产品范围偏度的集中。本文利用中国对外反倾销冲击作为进口竞争程度下降的拟自然实验,考察了企业是否受反倾销保护对其产品专业化程度影响的因果效应。进一步的异质性检验表明,相比加工贸易而言,一般贸易产生的进口竞争对企业产品专业化的促进作用更大;相比低收入国家而言,来自高收入国家的进口竞争对企业产品专业化的促进作用更大。本研究对如何理解进口竞争对中国经济发展的影响,提供了来自企业内部产品配置的证据。     

What Does CEOs’ Pay-for-Performance Reveal About Shareholders’ Attitude Toward Earnings Overstatements?

If overstatements were a symptom of the agency conflict, pay-for-performance sensitivities should have increased in response to the additional penalties for misreporting imposed by SOX. Our finding of their decrease is inconsistent with the view that overstatements were an unintended consequence of incentive pay prior to 2002. To corroborate our interpretation, we show that (i) CEO pay-for-performance sensitivities are higher among firms whose shareholders stand to benefit from overstatements; (ii) this cross-sectional relationship weakens significantly after SOX; and (iii) the within-firm decrease in pay-for-performance sensitivity is most pronounced among firms with high pre-SOX shareholder benefits from overstatements.     

Is market orientation affected by the product life cycle?

Considerable scholarly interest has been shown in the relationship between market orientation and business performance. Although a number of environmental moderators have been postulated to influence the market orientation–performance link, extant findings are inconclusive. This study takes a different approach by conceptualizing product life cycle stages in terms of variations in competitive intensity, market and technological turbulence. Data collected in Hong Kong reveal that Atuahene-Gima's [Atuahene-Gima, K. (1995). An exploratory analysis of the impact of market orientation on new product performance: A contingent approach. Journal of Product Innovation Management, 12: 275–293] product life cycle measure successfully discriminates stages in terms of market and technological turbulence, but fails to capture variation in competitive intensity. Market orientation is also found to be more highly valued by firms in growing and mature markets than firms in introductory and declining markets. Finally, the link between market orientation and firm performance is found to be strongest for firms in the growth stage and weakest for firms in the introductory stage of the product life cycle.     

Absorptive capacity,learning and profiting from outward FDI: Evidence from Canadian firms

The extant literature highlights a threshold productivity level firms are required to attain ex-ante in order to successfully undertake FDI. The current paper extends this framework by modelling a threshold productivity range which is below the required threshold productivity level. Firms in this range can successfully venture abroad when learning allows these firms to rise above that threshold productivity level, ex-post. Theoretical models which predict negative profitability for firms which undertake FDI when below the required threshold productivity level are extended to incorporate learning, and negative profits during the transition path turn positive once productivity increases above the threshold productivity level. The hypotheses developed are tested using panel data on firms operating in Canada over the period 2000 to 2014. These firm-level data include measures of productivity, firm size, R&D intensity, and when firms undertake outward FDI. We demonstrate that firms which venture abroad while in the threshold productivity range and also have sufficiently high levels of absorptive capacity, proxied by R&D intensity, are able to learn from their foreign experience, and hence increase their productivity levels, ex-post.     

The Total Factor Productivity Gap between Internationalised and Domestic Firms: Net Premium or Heterogeneity Effect?

The empirical literature on international trade predicts that internationally involved firms experience a productivity premium when compared to domestic firms. This finding is supported by comparing the unconditional productivity averages or distributions, or regressing the productivity on the international status dummy, controlled for the relevant covariates. In the present paper, we disentangle the distribution of the gross productivity premium from the component that is created by the different structural compositions of the two groups of firms; we can thereby measure the distribution of the net premium that is attributable to internationalisation. To this purpose, we use the quantile decomposition methodology ( Melly, 2005 ). The main results highlight that (i) the net premium is substantially lower than the gross premium and (ii) while the difference in the gross premium is uniform along the entire distribution, the net premium is significant only for the less productive firms. These results are confirmed even if different internationalisation modes are considered (i.e. exports, agreements and commercial penetration) using the domestic firms as baseline. One exception is the net premium for firms enrolled in foreign direct investment and/or offshoring; this premium does not decrease for firms at the top of the productivity distribution.     

Noisy selection model and the evolution of firm size and within-firm earnings distributions: a unified approach

Striking parallels observed in the evolution of firm size and within-firm earnings distributions over time are documented. At the time of entry, the distribution of the whole sample and that of eventual survivors look similar, but the distribution of survivors subsequently shifts to the right. The left tails thins out while the right tail thickens, and the variance increases. While separate theories in industrial organization and labor literature are offered to account for this evidence, we demonstrate that it can be explained in a unified framework presented by noisy selection. In particular, we show explicitly that noisy selection implies the shift of the conditional distribution to the right because less efficient workers (firms) face higher hazard rates before their true efficiency is revealed with certainty.     

Learning from exporting: The moderating effect of technological capabilities

There is evidence that exporters are more productive than non-exporters. Scholars argue that exporters may have access to knowledge spillovers in foreign markets and use this knowledge to become more efficient. However, we know little about whether learning from exporting is affected by firms’ heterogeneous resource endowments and, particularly, about the specific firm characteristics that matter the most in this respect. Utilizing a sample of 1534 Spanish manufacturing firms from 1990 to 2002, we empirically analyze whether a firm's technological capabilities (proxied by its relative R&D expenditures) affect its ability to learn from the interaction with foreign agents. We find that firm productivity increases after exporting for all firms. However, ex post productivity improvements are larger for the more technologically advanced firms than they are for their less technologically advanced counterparts. Our results show that some firms stand to benefit more from exporting than others and hint at the importance of absorptive capacity for knowledge acquisition overseas.     

When Do Local Firms Benefit from Inward Foreign Direct Investment? A Longitudinal Study of China's Manufacturing Sector Covering 1998–2007

Using comprehensive panel data on manufacturing firms in China during the 1998–2007 period, this study examines whether and when recipient local firms benefit from foreign direct investment (FDI). Local firms’ productivity improvements by the presence of foreign entrants are estimated, and according to the results, the relationship between FDI and local firms’ productivity shows an inverted U‐shaped pattern, with productivity increasing up to a certain point beyond which a higher level of FDI reduces local firms’ productivity. More importantly, the U‐shaped pattern is found for FDI from both non‐HMT foreign firms and overseas Chinese HMT (Hong Kong, Macao, and Taiwan) firms. In addition, the U‐shaped pattern varies across subnational regions such that the threshold at which an increase in FDI reduces productivity is lower for indigenous firms in coastal regions. This suggests that in China, local firms in inland and rural regions are the top beneficiaries of spillover effects. © 2015 Wiley Periodicals, Inc.     

CEO Pay,Shareholder Returns,and Accounting Profits

We assess the impact on CEO pay (including salary, cash bonus, and benefits in kind) of changes in both accounting and shareholder returns in 99 British companies in the years 1972-89. After correcting for heterogeneity biases inherent in the standard specifications of the problem, we find a strong positive relationship between CEO pay and within-company changes in shareholder returns, and no statistically significant relationship between CEO pay and within-company changes in accounting returns. Differences between firms in long-term average profitability do appear to have a substantial effect on CEO pay, while differences between firms in shareholder returns add nothing to the within-firm pay dynamics.These findings call into question the rationale for explicitly share-based incentive schemes.     

Effects of foreign acquisitions on financial constraints,productivity and investment in R&D of target firms in China

This paper examines whether foreign acquisitions lessen financial constraints, improve investment in research & development (R&D) and productivity of the target firms in China based on a sample of 914 cross-border mergers and acquisitions (CBM&A) over the period of 1994–2011. Using investment to cash-flow sensitivity to measure financial constraints, we find that foreign acquisitions in China are associated with a reduction of target firms’ financial constraints, irrespective of the ownership type of the target firm. However, the extent of financial constraint reduction is pronounced for non-SOEs compared to state-owned enterprises (SOEs). This study also provides evidence that foreign acquisitions improve Chinese target firms’ productivity and investment in R&D.     

Evaluating the Contribution of Exporting to UK Productivity Growth: Some Microeconomic Evidence

This study assesses the contribution of exporting activities to aggregate productivity growth in the UK for all market‐based sectors for the period 1996–2004, using a weighted FAME dataset. Based on decompositions of productivity growth, our findings suggest that, overall, exporting firms experience faster productivity growth than non‐exporting firms and therefore contribute more to national productivity growth. In addition, aggregate productivity for exporters benefits from a large contribution from ‘continuing’ firms improving their productivity, as well as exporters that have been taken‐over/merged or started‐up as new firms. In contrast, most of the TFP improvement for non‐exporters is attributable to lower productivity firms exiting, rather than from internal improvements or the productivity‐enhancing impact of new firms.     

Welfare gains from Foreign Direct Investment through technology transfer to local suppliers

We hypothesize that multinational firms operating in emerging markets transfer technology to local suppliers to increase their productivity and to lower input prices. To avoid hold-up by any single supplier, the foreign firm must make the technology widely available. This technology diffusion induces entry and more competition which lowers prices in the supply market. As a result, not just the foreign-owned firm, but all firms downstream of that supply market obtain lower prices. We test this hypothesis using a panel dataset of Indonesian manufacturing establishments. We find strong evidence of productivity gains, greater competition, and lower prices among local firms in markets that supply foreign entrants. The technology transfer is Pareto improving — output and profits increase for firms in both the supplier and buyer sectors. Further, the technology transfer generates an externality that benefits buyers in other sectors downstream from the supply sector as well. This externality may provide a justification for policy intervention to encourage foreign investment.     

Productivity Dispersion and its Determinants: The Role of Import Penetration

The new heterogeneous firm models in international economics predict a negative impact of trade openness on within-sector productivity disparities, due to a restructuring process leading to a reallocation of resources towards more efficient firms and the exit of less productive ones. I test this hypothesis for the Italian manufacturing sectors making use of panel data models. I investigate the existence of heterogeneous effects in terms of origin of imports and I account for a geographical dimension computing the productivity dispersion indicator by sector and regional macro-area. The analysis is implemented within a comprehensive framework controlling for other potential determinants, such as technological factors and domestic competition. My findings show that competitive pressure from low income countries reduces the productivity heterogeneity across firms. On the contrary, a positive impact is detected for the increased availability of intermediates originating from developed countries.     

Firm R&D,Absorptive Capacity and Learning by Exporting: Firm‐level Evidence from China

The absorptive capacity of firms developed through R&D promotes learning by exporting. In this paper, we estimate the instantaneous and long‐run productivity effects of exporting on the universe of Chinese manufacturing firms. We find that exporting has very different productivity effects for firms with different pre‐export R&D status. It has large and lasting productivity effects for firms with pre‐export R&D, while it has little effects for firms without pre‐export R&D. Furthermore, the effect of exporting increases with the number of years of pre‐export R&D investment.     

Is Firm Productivity Related to Size and Age? The Case of Large Australian Firms

We investigate the relationship between productivity, size and age of large Australian firms employing more than 100 employees or holding assets in excess of $100 million. In addition, we also investigate the extent of productivity persistence among these firms by looking at transition matrices of productivity distribution and productivity-rank mobility. The empirical study is based on the IBISWorld database used to estimate translog cost function to measure (a residual based) productivity. We find evidence, though somewhat weak, that larger and older firms are on average less productive. Further, we find strong evidence for a high degree of inertia in terms of productivity ranking within an industry.     

In Search of Environmental Spillovers

There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental spillovers from foreign firms. On the basis that foreign‐owned firms may encourage firms in their extended supply chain to improve their environment‐related management practices, evidence for the existence of environmental spillovers should be easier to find than productivity spillovers where firms naturally attempt to minimise intra‐industry knowledge leakage. In this paper we show that, first, foreign‐owned firms are more likely to implement environmental management systems (EMS) and, second, that the presence of foreign‐owned firms in those sectors that a firm supplies can encourage good environmental practice. This is especially true if a firm is foreign, has high absorptive capacity, and operates in the presence of formal and informal networks.     

Picking cherries or lemons: A unified theory of cross‐border mergers and acquisitions

This article provides a theoretical framework that enhances understanding of empirical evidence suggesting that international mergers and acquisitions, a key source of foreign direct investment, seemingly target in‐country firms that are at the extremes of the productivity spectrum—either high‐productivity firms, so‐called cherries, or low‐productivity firms, the “lemons.” The framework demonstrates that foreign firms with intermediate inputs seek high‐productivity domestic firms, while foreign firms with managerial expertise seek low‐productivity domestic firms. We also show that because of the difference in available outside options, high‐productivity domestic firms can demand a significantly higher portion of profits in the partnership than low‐productivity domestic firms.