Skip to main content

Importing, exporting and performance in sub-Saharan African manufacturing firms

Abstract

This paper examines productivity differences between internationally trading and non-trading firms using data on a sample of firms from 19 sub-Saharan African countries. The paper provides the first evidence of whether exporters, importers and two-way traders perform better than non-traders, and whether there are differences in performance between different types of trading firms in sub-Saharan Africa. Our results indicate that exporters, importers and two-way traders perform better than non-exporters, non-importers and non-two-way traders. We further find that two-way traders perform better than importers only or exporters only, results largely consistent with recent results for other countries and regions. Considering information on export starters, continuers and exiters we also present some evidence suggesting that there is no significant difference in performance between export continuers and starters.

This is a preview of subscription content, access via your institution.

Notes

  1. 1.

    In response to such empirical studies theoretical models such as that of Melitz (2003) were developed that provided a rationale for the observed positive relationship between export status and firm productivity, with firms in these models self-selecting into export markets due to sunk costs of exporting.

  2. 2.

    Indeed, a large empirical literature at the country and industry level has examined the importance of knowledge spillovers through imports and found them to be economically significant both between developed countries, and also from developed to developing countries (for seminal studies see Coe and Helpman 1995; Coe et al. 1997).

  3. 3.

    Much of this recent literature on importing and performance has concentrated on the firm-level effects of offshoring. In addition to allowing firms to acquire inputs at lower costs and to acquire inputs embodying a higher level of technology, offshoring of production gives firms the opportunity to allocate their resources to the activities where they are most productive, helping to increase specialisation and benefit from economies of scale. Despite such benefits there are also likely to be costs to the firm from offshoring. Such costs may include those related to differences in language, management culture and legal systems, as well as the search costs involved in finding partners in distant and foreign markets.

  4. 4.

    Such costs may include search costs as firms seek potential foreign suppliers, as well as costs related to the inspection of goods, negotiation and contract formulation, as well as to acquisition and customs procedures.

  5. 5.

    See Antras and Helpman (2004) who develop a model similar to Melitz (2003) in which it is assumed that there are fixed costs to importing, and which results in the self-selection of firms into importing.

  6. 6.

    Recently—as data have become available—studies have begun to consider the trade-productivity relationship for services firms also (see Wagner 2012, Table 3) for a review of these studies and Foster-McGregor et al. (2012) for evidence in SSA).

  7. 7.

    This dataset has been used elsewhere to consider different aspects of the relationship between firm performance and the way that a firm serves a foreign market. Foster et al (2013) for example use this dataset to examine whether SSA firms that serve foreign markets through FDI perform better than those serving foreign markets through exporting. Results are found to differ between manufacturing and services firms.

  8. 8.

    A separate literature exists suggesting that foreign-owned firms perform better than domestically owned ones (see for example Harris 2002; Harris and Robinson 2003; Yasar and Morrison Paul 2007). Following existing studies we define a firm as foreign owned if more than 10 % of the equity of the firm is owned by non-residents.

  9. 9.

    Defined as the ratio of technical, administrative and sales workers in total employment.

  10. 10.

    For an introduction to quantile regression models see Buchinsky (1998) and Koenker and Hallock (2001).

  11. 11.

    The data used in this paper are confidential, but not exclusive. In order to gain access to the data researchers will need to contact UNIDO and sign a confidentiality agreement. Once this agreement has been signed the authors would be happy to share the sample of data used in their analysis. The Stata programs used to estimate all of the results in the paper are also available from the authors on request.

  12. 12.

    TFP is estimated by assuming a constant capital share of one-third. In particular, TFP is defined as: \( TFP = VA / (EMP^{2/3} FA^{1/3} ) \), where \( VA \) is value added, \( EMP \) refers to total employment and \( FA \) to total fixed assets.

  13. 13.

    All monetary values are expressed in US dollars, using the average exchange rate over the previous 3 years (2009–2011).

  14. 14.

    Defined as the ratio of net (pre-tax) profit to revenue (multiplied by 100).

  15. 15.

    We also test for differences in the median of our performance measures across these groups using the Statal package ‘cendif’. The results are not reported for reasons of brevity, but are largely similar to those using the test of means.

  16. 16.

    The premia are calculated from the estimated coefficients on the trade dummies as \( 100(e^{\beta } - 1) \), where \( \beta \) is the estimated coefficient.

References

  1. Andersson, M., Lööf, H., & Johansson, S. (2008). Productivity and international trade: Firm level evidence from a small open economy. Review of World Economics/Weltwirtschaftliches Archiv, 144(4), 774–801.

    Article  Google Scholar 

  2. Antras, P., & Helpman, E. (2004). Global sourcing. Journal of Political Economy, 112(3), 552–580.

    Article  Google Scholar 

  3. Aw, B. Y., Chung, S., & Roberts, M. J. (2000). Productivity and turnover in the export market: Micro-level evidence from Taiwan (China) and the Republic of Korea. World Bank Economic Review, 14(1), 65–90.

    Article  Google Scholar 

  4. Bernard, A. B., & Jensen, J. B. (1995). Exporters, jobs, and wages in U.S. manufacturing: 1976–1987. Brookings Papers on Economic Activity: Microeconomics, 1995, 67–119.

    Article  Google Scholar 

  5. Bigsten, A., Collier, P., Dercon, S., Fafchamps, M., Gauthier, B., Gunning, J. W., et al. (2004). Do African manufacturing firms learn from exporting? Journal Development Studies, 40(3), 115–141.

    Article  Google Scholar 

  6. Bigsten, A., & Gebreeyesus, M. (2009). Firm productivity and exports: Evidence from Ethiopian manufacturing. Journal of Development Studies, 45(10), 1594–1614.

    Article  Google Scholar 

  7. Bramatia, M., & Croux, C. (2007). Robust estimators for the fixed effects panel data model. Econometrics Journal, 10(3), 521–540.

    Article  Google Scholar 

  8. Buchinsky, M. (1998). Recent advances in quantile regression methods: A practical guideline for empirical research. Journal of Human Resources, 33(1), 88–126.

    Article  Google Scholar 

  9. Canay, I. (2011). A simple approach to quantile regression for panel data. Econometrics Journal, 14(3), 368–386.

    Article  Google Scholar 

  10. Castellani, D., Serti, F., & Tomasi, C. (2010). Firms in international trade: Importers’ and exporters’ heterogeneity in the Italian manufacturing industry. World Economy, 33(3), 424–457.

    Article  Google Scholar 

  11. Coe, D. T., & Helpman, E. (1995). International R&D spillovers. European Economic Review, 39(5), 859–887.

    Article  Google Scholar 

  12. Coe, D. T., Helpman, E., & Hoffmaister, A. W. (1997). North–South R&D spillovers. Economic Journal, 107(440), 134–149.

    Article  Google Scholar 

  13. Delgado, M. A., Farinas, J. C., & Ruano, S. (2002). Firm productivity and export markets: A non-parametric approach. Journal of International Economics, 57(2), 397–422.

    Article  Google Scholar 

  14. Foster-McGregor, N., Isaksson, A., Kaulich, F. (2013). Outward foreign direct investment, exporting and firm-level performance in sub-Saharan Africa. (wiiw Working Papers 96). Vienna: Vienna Institute for International Economic Studies.

  15. Foster-McGregor, N., Isaksson, A., & Kaulich, F. (2012). Importing, exporting and the productivity of services firms in sub-Saharan African manufacturing firms. (wiiw Working Papers 98). Vienna: Vienna Institute for International Economic Studies.

  16. Fryges, H., & Wagner, J. (2008). Exports and productivity growth—first evidence from a continuous treatment approach. Review of World Economics/Weltwirtschaftliches Archiv, 144(4), 695–722.

    Article  Google Scholar 

  17. Girma, S., Görg, H., & Strobl, E. (2004). Exports, international investment, and plant performance: Evidence from a non-parametric test. Economics Letters, 83(3), 317–324.

    Article  Google Scholar 

  18. Girma, S., Greenaway, D., & Kneller, R. (2003). Export market exit and performance dynamics: A causality analysis of matched firms. Economics Letters, 80(2), 181–187.

    Article  Google Scholar 

  19. Harris, R. (2002). Foreign ownership and productivity in the United Kingdom—some issues when using the ARD establishment level data. Scottish Journal of Political Economy, 49(3), 318–335.

    Article  Google Scholar 

  20. Harris, R., & Robinson, C. (2003). Foreign ownership and productivity in the United Kingdom: Estimates for UK manufacturing using the ARD. Review of Industrial Organisation, 22(3), 207–223.

    Article  Google Scholar 

  21. Huber, P. (1964). Robust estimation of a location parameter. Annals of Mathematical Statistics, 35(1), 73–101.

    Article  Google Scholar 

  22. Koenker, R. (2004). Quantile regression for longitudinal data. Journal of Multivariate Analysis, 91(1), 74–89.

    Article  Google Scholar 

  23. Koenker, R., & Hallock, K. (2001). Quantile regression. Journal of Economic Perspectives, 15(4), 143–156.

    Article  Google Scholar 

  24. Kraay, A. (2002). Exports and economic performance: Evidence from a panel of Chinese enterprises. In Mary-Francoise Renard (ed.), China and its Regions. Economic Growth and Reform in Chinese Provinces, Cheltenham, Edward Elgar, 278–299. (Originally published in Revue d’Economique du Developpement, 2, 183–207, 1999).

  25. Krugman, P. (1993). What do undergrads need to know about trade? American Economic Review Papers and Proceedings, 83(2), 23–26.

    Google Scholar 

  26. Martins, P., & Yang, Y. (2009). The impact of exporting on firm productivity: A meta-analysis of the learning-by-exporting hypothesis. Review of World Economics/Weltwirtschaftliches Archiv, 145(3), 431–445.

    Article  Google Scholar 

  27. Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725.

    Article  Google Scholar 

  28. Mengistae, T., & Pattillo, C. (2004). Export orientation and productivity in sub-Saharan Africa. IMF Staff Papers, 51(2), 327–353.

    Google Scholar 

  29. Muûls, M., & Pisu, M. (2009). Imports and exports at the level of the firm: Evidence from Belgium. World Economy, 32(5), 692–734.

    Article  Google Scholar 

  30. Powell, D. (2010). Unconditional quantile regression for panel data with exogenous or endogenous regressors. (RAND Working Papers 710–1). Santa Monica: RAND Corporation Publications Department.

  31. Rousseeuw, P. J., & Yohai, V. (1987). Robust regression by means of S-estimators. In J. Franke, W. Härdle, & D. Martin (Eds.), Robust and nonlinear time series analysis (pp. 256–272). Berlin: Springer Verlag.

    Google Scholar 

  32. UNIDO. (2012). Africa investor report 2011: Towards evidence-based investment promotion strategies. Vienna: United Nations Industrial Development Organization.

    Google Scholar 

  33. Van Biesebroeck, J. (2005). Exporting raises productivity in sub-Saharan African manufacturing firms. Journal of International Economics, 67(2), 373–391.

    Article  Google Scholar 

  34. Verardi, V., & Croux, C. (2009). Robust regression in Stata. Stata Journal, 9(3), 439–453.

    Google Scholar 

  35. Verardi, V., & Wagner, J. (2012). Productivity premia for German manufacturing firms exporting to the Euro-area and beyond: First evidence from robust fixed effects estimations. World Economy, 35(6), 694–712.

    Article  Google Scholar 

  36. Vogel, A., & Wagner, J. (2010). Higher productivity in importing German manufacturing firms: Self-selection, learning from importing, or both? Review of World Economics/Weltwirtschaftlichs Archiv, 145(4), 641–665.

    Article  Google Scholar 

  37. Wagner, J. (2007). Exports and productivity: A survey of the evidence from firm-level data. World Economy, 30(1), 60–82.

    Article  Google Scholar 

  38. Wagner, J. (2012). International trade and firm performance: A survey of empirical studies since 2006. Review of World Economics/Weltwirtschaftliches Archiv, 148(2), 235–267.

    Article  Google Scholar 

  39. Yasar, M., & Morrison Paul, C. J. (2007). International linkages and productivity at the plant level: Foreign direct investment, exports, imports and licensing. Journal of International Economics, 71(2), 373–388.

    Article  Google Scholar 

  40. Yohai, V. (1987). High breakdown-point and high efficiency estimates for regression. Annals of Statistics, 15(2), 642–665.

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Neil Foster-McGregor.

Additional information

The views expressed herein are those of the author(s) and do not necessarily reflects the views of the United Nations Industrial Development Organization.

Appendix

Appendix

See Tables 11 and 12.

Table 11 Number of firms in sample by country
Table 12 Number of firms in sample by industry

About this article

Cite this article

Foster-McGregor, N., Isaksson, A. & Kaulich, F. Importing, exporting and performance in sub-Saharan African manufacturing firms. Rev World Econ 150, 309–336 (2014). https://doi.org/10.1007/s10290-013-0177-y

Download citation

Keywords

  • Firm-level performance
  • Importers
  • Exporters

JEL Classification

  • D24
  • F10
  • M20
  • L10