The DNA of the domestic value added (DVA) in exports: Firm‐level analysis of DVA in exports

This paper sheds light on the relationship between domestic value added in exports (DVA) and the different ways firms participate in GVCs by exploiting a detailed firm‐level data set for the whole population of Slovenian exporting firms for the period 2002–14. The paper draws attention to those firm characteristics that allow a greater share of DVA to be captured. Although reliance on industry‐level data from input–output tables is the most common way of doing this in the literature, this paper develops a method for estimating DVA in exports using firm‐level data by adapting the approach taken by Kee and Tang (2016). The paper finds that in terms of DVA, domestic‐owned exporting firms outperform more productive foreign‐owned firms and that firms not affiliated with permanent suppliers from abroad capture higher DVA in exports. Positive outcomes of DVA in exports can be observed, all else being equal, for firms with a larger share of intangible capital per worker and firms with a smaller share of exports based on imports of the same products. The results also show that when exporting more to less demanding markets, like the countries of former Yugoslavia, firms benefit more in terms of greater DVA gains in exports.     

Market access,supplier access,and Africa's manufactured exports: A firm level analysis

Abstract

In a large cross-country sample of manufacturing establishments drawn from 188 cities, average exports per establishments are smaller for African firms than for businesses in other regions. Based on the estimation of firm level exporting equations, we show that this is mainly because, on average, African firms face more adverse economic geography and operate in poorer institutional settings. One part of the effect of geography operates through Africa's lower ‘foreign market access’: African firms are located further away from wealthier or denser potential export markets. A second occurs through the region's lower ‘supplier access’: African firms face steeper input prices, partly because of their physical distance from cheaper foreign suppliers, and partly because domestic substitutes for importable inputs are more expensive. Africa's poorer institutions reduce its manufactured exports directly, as well as indirectly, by lowering foreign market access and supplier access. Both geography and institutions influence average firm level exports significantly more through their effect on the number of exporters than through their impact on how much each exporter sells onto foreign markets.     

Spillover Effects from Inward FDI on the Exporting Decisions of Chilean Manufacturing Plants

We study the presence of spillover effects on three exporting decisions (likelihood, quantity, propensity) of Chilean manufacturing firms during the period 2001–2004. Evidence suggests that Chilean firm’s export likelihood is positively affected by other domestic firms’ exports. In contrast, exports by MNEs operating in Chile negatively affect Chilean firm’s export likelihood, although MNE-employment generates positive spillover effects, suggesting externalities in human capital. We also find evidence of spillovers from MNE activity on the proportion of production the firm exports (export propensity), but not on how much they decide to export (export quantity).     

The impact of transport costs on new venture internationalisation

This paper investigates the importance of transport costs in new venture internationalisation, i.e. of firms that start exporting before they are 3 years of age. It does so by merging two large international datasets, on the firm level (covering 49,584 firms) as well as on the country level (covering 154 countries). It is found that transport costs matter significantly for new venture internationalisation, for older firms’ decision to export, as well as the extent of the latter’s subsequent exports. Export costs, the quality of transport infrastructure and domestic logistics costs affect new venture internationalisation even when controlling for a range of standard determinants. New international ventures behave differently from older firms in two important ways: (1) Transport costs affect the probability that they will export but not the extent of their subsequent exports and (2) their probability of exporting is affected negatively by their networking, domestic success and ISO status, whilst in the case of older firms, these factors have a positive impact. Various recommendations for policy and further research are made.     

Domestic and export performances of French firms

The French trade balance deteriorated almost continuously from the late 1990s to the early 2010s. At the macroeconomic level, French export market share deteriorated while domestic sales kept pace with domestic demand. Does this assessment apply to individual firms? Using microlevel data for French industrial firms over the period 2002–12, we explore the link between domestic and export sales. We show that export and domestic sales have a tendency, albeit slight, to move in opposite directions. This may be due to factors such as deliberate strategies to target a specific market or the presence of production constraints. Addressing the resulting endogeneity issue, our analysis shows that a positive demand shock in the domestic market also leads to an increase in exports. In particular, a 10% increase in domestic demand leads to a 4% increase in exports. This complementarity between markets seems to be driven by small firms and could reflect the existence of liquidity constraints. Increased sales in one market could lessen these constraints by facilitating funding for company development in the export market.     

Import Churning and Export Performance of Multi‐product Firms

This paper analyses the impact of churning in the imported varieties of capital and intermediate inputs on firm export scope and productivity. Using detailed data on imports and exports at the firm‐product‐market level, we document substantial churning in both imports and exports for Slovenian manufacturing firms in the period 1994–2008. On average, a firm changes about one‐quarter of imported and exported product‐markets every year, while gross churning in terms of added and dropped product‐markets is almost three times higher. A substantial share of this product churning is due to simultaneous imports and exports of firms in identical varieties within the same CN‐8 product code (so called pass‐on‐trade). We find that churning in imported varieties is far more important than reduction in tariffs or declines in import prices for firms’ productivity growth and increased export product scope. We also find gross churning has a bigger impact on firm productivity improvements by a factor of more than 10 in comparison with net churning. Both adding and dropping of imported input varieties thus seem to be of utmost importance for firms aiming to optimise their input mix towards their most valuable inputs. These effects are further enhanced when excluding simultaneous trade in identical varieties, suggesting that pass‐on‐trade has less favourable effects on firms’ long‐run performance than regular trade.     

Export Intensification by Firms During Domestic Economic Recession

The present paper investigates the influence of an economic recession in the domestic market on the export marketing behavior of firms. The thesis of the paper is that firms intesify their export marketing efforts in order to overcome domestic adversity, a notion for which there is, at present, very little conclusive evidence. The paper presents findings from an empirical study, involving United States exporters during the 1980-82 recession, that suggest that a domestic recession is a significant export stimulant. Firms which are adversely affected by a recession are more likely than unaffected firms to intensify their exports. The paper also concludes that firms which intensify their exports in response to a recession are likely to exhibit a pronounced emphasis on more tactical and short-term export marketing activities. Finally, contrary to our expectation, the perceived benefits of export intensification during the recession were found to be inversely related to firms' export involvement.     

Does foreign investment benefit the exporting activities of Vietnamese firms?

Using firm-level data, this paper examines the effects of foreign investment on the exporting behaviour of domestic firms in the Vietnamese manufacturing and service sectors. Applying the Heckman selection model on panel data and following the Wooldridge approach, we find that investment by foreign firms has a significant positive effect on the decision of domestic firms in the same and upstream sectors to export. The proportion of exports of domestic firms declines through horizontal and forward linkages, but increases through backward linkages in the manufacturing sector. However, there is only weak evidence in support of export spillovers on domestic firms in the service sector. We also find that the presence of foreign firms has differing effects on the exporting activities of low- versus high-tech firms in the manufacturing sector.     

Firm-level volatility and exports

This paper shows that the share of exports in the total sales of a firm has a positive and substantial impact on the volatility of its sales. Decomposing the volatility of sales of exporters between their domestic and export markets, I show using an identification strategy based on a firm-specific geographical instrument that firms with a larger export share have more volatile domestic sales and less volatile exports. These empirical patterns can be explained using a model in which firms face market-specific shocks and short-run convex costs of production. In such a framework, firms react to a shock in one market by adjusting their sales in the other market. I point to strong evidence that output variations on the domestic and export market are negatively correlated at the firm level. This result casts doubts on the standard hypothesis that firms face constant marginal costs and maximize profits on their different markets independently of each other. Furthermore, it points to the caveat that sales volatility on a particular market only gives limited information about the size of shocks on that market.     

Developing countries in competition for foreign investment

This study analyzes the competition for foreign direct investment (FDI) among countries at different stages of development. It is assumed that domestic companies in a more-developed country use more capital in production and that wages in a less-developed country are lower. Countries can compete for FDI by increasing the supply of public inputs in the economy, in addition to (or instead of) offering subsidies or tax reliefs to foreign investors. The results reveal that if governments of competing countries are not allowed to discriminate between domestic and foreign firms, there may be situations in which a less-developed economy will attract FDI depending on the labor cost differential and the responsiveness of foreign investor's and domestic companies' output to changes in the supply of public inputs. If tax discrimination between domestic and foreign firms is permitted, both countries will optimally raise the supply of public inputs, but the more-developed country will always win the foreign investment despite higher labor costs. Thus, governments of less-developed countries may have an incentive to work on an international agreement to disallow tax discrimination.     

Exports,firm size,and firm dynamics

This paper explores the relationships between exports, firm size, and firm dynamics. It is based on a unique longitudinal data set collected at the establishment level, covering some 7000 manufacturing German firms. We present stylized facts on exports and firm size, showing that the probability that a firm is an exporter increases with firm size; however, there are many successful exporters among small firms, and non-exporters among larger firms, too, while most of the exports are from the top size groups of firms. An econometric study shows a picture that is consistent with theoretical considerations: The impact of firm size on exports is positive but decreasing, while human capital intensity, domestic market share, and advanced technology all have a positive influence on the export performance of a firm. Firm growth and export performance are positively related, as is expected from a model of a price-discriminating monopolist.     

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.     

International standards certification,institutional voids and exports from developing country firms

This paper analyses the impact of International Standards Certification (ISC) on the export participation and the scale of exports of firms based in 89 developing or transition countries. We conceptualise ISC as an endogenous institutional advantage, which bridges institutional voids in the country and helps firms to export. The empirical results show that certified firms are more likely to export, and to export on a larger scale. The impact of ISC runs through two channels: productivity and transaction cost economies. We show that certification plays an important role in bringing down transaction costs in international markets, while also maintaining and raising efficiency. This finding is reinforced by additional evidence, suggesting that ISC matters more for the export participation of domestic firms than for foreign firms and is of greater importance for firms based in countries characterised by severe institutional voids.     

Innovation and export performance of emerging market enterprises: The roles of state and foreign ownership in China

This article examines the role of ownership for the relationship between innovation and exports. Analyzing a large firm-level data set on Chinese manufacturing firms during 2000–2007, we find that state ownership has a positive moderating effect on the innovation–export relationship. We ascribe this effect to state-owned firms’ privileged access to complementary resources and networks that strengthen their ability to use innovation to generate exports. In contrast to many earlier studies, we also find that foreign ownership has a negative moderating effect. One likely reason is that indicators of local innovation do not reflect the flows of knowledge between foreign-owned firms and their parent companies. This finding highlights the fact that innovation and production may be geographically separated within multinational enterprises. A policy implication of the analysis is that public support to innovation is likely to have stronger effects on exports when it targets firms that carry out most of their activities in domestic market.     

Exchange Rate,External Orientation of Firms and Wage Adjustment

We estimate the effect of exchange rate movements on firm‐level wages, using a representative panel of Italian manufacturing firms. We show that the direction and size of wage adjustment is shaped by the international exposure of each firm on both the sale and cost side of the balance sheet, similar to the response of employment documented in (Nucci and Pozzolo, Journal of International Economics 2010; 82 : 112.). Through the revenue side, wages tend to rise after a currency depreciation and the effect is more pronounced the higher is the firm's exposure to sales from exports. Through the expenditure side, a depreciation induces a cut in the firm's wages, and the effect is larger the higher is the incidence of imported inputs in total production costs. For a given degree of external orientation, both these effects are larger for firms with a lower market power. Moreover, we document that the effect of exchange rates on wages is shaped by the extent of sectoral import penetration in the domestic market.     

Adjustment strategies of multinational enterprises to changing national competitiveness

This article establishes a link between four combinations of relative firm‐specific advantages and comparative advantage and the adjustment strategies of multinational firms. Based on the distribution of firms across advantage combinations, hypotheses on four adjustment strategies are developed: expansion, rationalization, exit and relocation. Upon a detailed analysis of a representative sample of manufacturing firms for 1990–2000, a consistent competitiveness ranking of domestic and foreign firms across industries and over time is derived. The strategies followed by the firms are reflected by the development of employment, value‐added and exports. Results show that firms are not distributed entirely in line with comparative advantage, but the dynamic interaction (“match”) of location‐advantage and firm‐specific advantage seems to be decisive. Results also confirm that domestic and foreign firms partly react differently under a given advantage combination. The following principles for location policies are suggested: the empirically measured mismatch of firm capabilities and location advantages determine when direct and indirect measures should be used. The intensity of policy measures should be oriented towards the competitiveness ranking derived.     

The Impacts of Alignment with Global Product Standards on Exports of Firms in Developing Countries

Complying with global standards and technical norms can be costly, making them potential impediments to trade, but it can also expand export opportunities. Two policies available to governments are alignment of domestic technical regulations with international standards and entry into mutual recognition agreements (MRAs). We study the effects of such decisions on the volume of exports to developed markets by firms in developing countries, using data from a World Bank firm‐level survey of awareness of global product norms. Both standards alignment and MRAs are associated with more exports to developed countries, but only MRAs significantly promote exports. This finding is consistent with theoretical predictions that MRAs should reduce the fixed costs of exporting more than standards alignment, permitting more firms to enter export markets in higher volumes. Governments in developing countries hoping to encourage exports may wish to favour the negotiation of mutual recognition of testing and certification procedures with major trading partners as a more affirmative avenue to expanding international sales.     

Trade and Innovation in Services: Evidence from a Developing Economy

Studies on innovation and international trade have traditionally focused on manufacturing because neither was seen as important for services. Moreover, the few existing studies on services focus only on industrial countries, even though in many developing countries services are already the largest sector in the economy and an important determinant of overall productivity growth. Using a recent firm‐level innovation survey for Chile to compare the manufacturing and ‘tradable’ services sector, this paper reveals some novel patterns. First, even though services firms have on average a much lower propensity to export than manufacturing firms, services exports are less dominated by large firms and tend to be more skill intensive than manufacturing exports. Second, services firms appear to be as innovative as – and in some cases more innovative than – manufacturing firms, in terms of both inputs and outputs of ‘technological’ innovative activity, even though services innovations more often take a ‘non‐technological’ form. Third, services exporters (like manufacturing exporters) tend to be significantly more innovative than non‐exporters, with a wider gap for innovations close to the global technological frontier. These findings suggest that the growing faith in services as a source of both trade and innovative dynamism may not be misplaced.     

贸易便利化、中间品进口与企业出口增加值

本文将中国工业企业数据库和中国海关贸易数据库相匹配,采用双受限Tobit模型检验了贸易便利化如何通过中间品进口提升企业出口增加值。研究发现,贸易便利化对企业出口增加值存在显著的正向促进作用,其机制主要是通过中间品进口种类增加产生的技术溢出效应、中间品进口成本下降产生的成本节约效应、上游中间品进口产生的竞争效应等实现的。进一步研究发现,贸易便利化对企业出口增加值的影响存在异质性,表现为非国有企业、一般贸易企业和资本密集型企业受到的影响更大。本文认为,应该加强基础设施建设,营造良好的制度环境,积极推进贸易便利化,扩大进口中间品种类,降低进口中间品价格,抑制上游中间品企业垄断,从而提高企业出口增加值,实现开放型经济高质量发展。     

Has the International Fragmentation of German Exports Passed Its Peak?

In the second half of the nineties the import content of German exports (intermediate inputs for the production of exports and imports destined for immediate re-export) increased considerably. The following article examines whether this trend has continued up to the present.