Skip to main content

Importing, Productivity and Absorptive Capacity in Sub-Saharan African Manufacturing and Services Firms

Open Economies Review volume 27, pages 87–117 (2016)Cite this article

Abstract

This paper examines the relationship between importing and firm-level productivity in Sub-Saharan Africa. Using a recent firm-level survey for 19 Sub-Saharan African countries, the paper shows that there is a positive and significant relationship between importing and productivity for both manufacturing and services firms. Using a series of robustness tests, the paper finds that the importer-productivity relationship is robust in the case of manufacturing firms, but the results for services appear sensitive to the presence of extreme values. Finally, the paper shows that manufacturing firms with the highest levels of human capital show the strongest relationship between importing and productivity, a result consistent with a role for absorptive capacity in maximising the benefits of importing.

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

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price includes VAT (USA)
Tax calculation will be finalised during checkout.

Notes

  1. An earlier literature at the aggregate level also considered the relationship between exporting and aggregate productivity or growth (see for example Michaely 1977; Feder 1983).

  2. A non-linear relationship between firm size and productivity has been reported e.g. by the International Study Group on Exports and Productivity (ISGEP) (ISGEP) (2008).

  3. White-collar workers include technical workers, supervisory and managerial staff, and clerical, administrative and sales staff. Blue-collar workers include production staff in the case of manufacturing firms, and manual staff in the case of services firms.

  4. A firm is defined as foreign-owned if a direct investor that is resident of another economy has 10 % or more of the ordinary shares or voting power or the equivalent, an approach consistent with much of the existing literature.

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

  6. In a production function context, the possibility of endogeneity of inputs arises. While this issue is difficult to deal with in a cross-section setting, recent developments with firm-level panel data allow one to control for endogeneity of inputs by assuming a monotonic relationship between some firm-level decision variable (for example investment) and the unobserved firm-level state variable productivity (see Olley and Pakes 1996).

  7. For example, it would have been useful to be able to estimate three structural equations, (i) a production function, (ii) an import equation for the firm decision to import, and (iii) a skilled labor share equation. This would have allowed to control the endogeneity of both the import and the skilled labor share variables and to provide a better mechanism through which imported capital and skilled labor impact productivity.

  8. For a brief introduction to matching techniques see Todd (2010). In the results reported below, we use single nearest neighbor matching.

  9. The data used in this paper are confidential, but not exclusive. In order to gain access to the data, a confidentiality agreement with UNIDO will need to be signed.

  10. Initially, also Cote d’Ivoire was part of the survey as the 20th country. During the data collection, however, the work in Cote d’Ivoire got stopped and the collected data did not get verified by the national supervisor. Given the incomplete execution of the sampling plan and the lack of quality assurance, we did not include Cote d’Ivoire in this study.

  11. In Nigeria, this structure was doubled due to country size, creating a southern survey zone coordinated in Lagos, and a northern survey zone coordinated in Abuja.

  12. Exceptions were Cape Verde, Lesotho and Burundi, where firms with 5 to 10 employees were also included.

  13. We also estimated the basic model for each country separately. A lack of degrees of freedom for many countries resulted in many insignificant coefficients, but the coefficients tend to be positive. These results are available upon request. For all firms, we observe a negative and significant coefficient in only one of 19 countries (Niger), while we find significant and positive coefficients in those countries with the largest sample sizes (Cameroon, Ghana, Mozambique and Tanzania).

  14. Results from the OLS single threshold model for manufacturing firms only are available upon request. The coefficients on the importer variable are positive and significant in both regimes, but are larger in the high regime.

  15. Results from the OLS and Qreg single threshold models for services firms only are available upon request. The coefficients on the importer variable are positive and significant only in the low regime, while close to zero and insignificant in the high regime.

References

  • Aitken BJ, Harrison AE (1999) Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. Am Econ Rev 89(3):605–618

    Article  Google Scholar 

  • Altomonte C, Bekes G (2011) Trade complexity and productivity. MICRO-DYN Working Paper no. 08/11

  • Amiti M, Konings J (2007) Trade liberalization, intermediate inputs and productivity: evidence from Indonesia. Am Econ Rev 97(5):1611–1638

    Article  Google Scholar 

  • Amiti M, Wei SJ (2009) Service offshoring, productivity and employment: evidence from the US. World Econ 32(2):203–220

    Article  Google Scholar 

  • Andersson M, Lööf H, Johansson S (2008) Productivity and international trade – firm-level evidence from a small open economy. Rev World Econ 144(4):774–801

    Article  Google Scholar 

  • Antras P, Helpman E (2004) Global sourcing. J Polit Econ 112(3):552–580

    Article  Google Scholar 

  • Augier P, Cadot O, Dovis M (2013) Imports and TFP at the firm level: the role of absorptive capacity. Can Rev Econ 46(3):956–981

    Article  Google Scholar 

  • Bai J (1997) Estimating multiple breaks one at a time. Econ Theory 13:315–352

    Article  Google Scholar 

  • Bartelsman EJ, Doms M (2000) Understanding productivity: lessons from longitudinal micro data. J Econ Lit 38(3):569–594

    Article  Google Scholar 

  • Bas MA, Strauss-Kahn V (2014) Does importing more inputs raise exports? Firm level evidence from France. Rev World Econ 150(2):241–275

    Article  Google Scholar 

  • Bekes G, Harasztosi P, Murakozy B (2011) Firms and products in international trade: evidence from Hungary. Econ Syst 35(1):4–24

    Article  Google Scholar 

  • Benhabib J, Spiegel M (1994) The role of human capital in economic development: evidence from aggregate cross-country data. J Monet Econ 34:143–173

    Article  Google Scholar 

  • Bernard AB, Jensen JB, Redding SJ, Schott PK (2007) Firms in international trade. J Econ Perspect 21(3):105–130

    Article  Google Scholar 

  • Buchinsky M (1998) Recent advances in quantile regression methods: a practical guideline for empirical research. J Hum Resour 33(1):88–126

  • Caner M (2002) A note on least absolute deviation estimation of a threshold model. Econ Theory 18(3):800–814

    Article  Google Scholar 

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

    Article  Google Scholar 

  • Chan K (1993) Consistency and limiting distribution of the least squares estimator of a threshold autoregressive model. Ann Stat 21(1):520–533

  • Coe DT, Helpman E (1995) International R&D spillovers. Eur Econ Rev 39(5):859–887

    Article  Google Scholar 

  • Coe DT, Helpman E, Hoffmaister AW (1997) North–south R&D spillovers. Econ J 107(440):134–149

    Article  Google Scholar 

  • Coe DT, Helpman E, Hoffmaister AW (2009) International R&D spillovers and institutions. Eur Econ Rev 53:723–741

    Article  Google Scholar 

  • Crespo-Cuaresma J, Foster N, Scharler J (2008) Barriers to technology adoption, international R&D spillovers and growth. Econ Bull 15(3):1–7

    Google Scholar 

  • Damijan J, Kostevc C (2015) Learning from trade through innovation. Oxf Bull Econ Stat 77(3):408–436

    Article  Google Scholar 

  • Dovis M, Milgram-Baleix J (2009) Trade, tariffs and total factor productivity: the case of Spanish firms. World Econ 32(4):575–605

    Article  Google Scholar 

  • Eaton J, Kortum S (2001) Trade in capital goods. Eur Econ Rev 45:1195–1235

    Article  Google Scholar 

  • Eriksson T, Smeets V, Warzynski F (2009) Small open economy firms in international trade: evidence from Danish transactions-level data. Econ J Dan Econ J 147(2):175–194

    Google Scholar 

  • Falvey RE, Foster N, Greenaway D (2007) Relative backwardness, absorptive capacity and knowledge spillovers. Econ Lett 97:230–234

    Article  Google Scholar 

  • Farinas JC, Martin-Marcos A (2010) Foreign sourcing and productivity: evidence at the firm level. World Econ 33(3):482–506

    Article  Google Scholar 

  • Feder G (1983) On exports and economic growth. J Dev Econ 12:59–73

    Article  Google Scholar 

  • Forlani E (2012) Irish firms’ productivity and imported inputs. DEM Working Papers Series 009, University of Pavia, Department of Economics and Management

  • Foster-McGregor N, Isaksson A, Kaulich F (2013) Foreign ownership and labour markets in Sub-Saharan African firms. Wiiw Working Papers 99, The Vienna Institute for International Economic Studies, wiiw (forthcoming in African Development Review)

  • Foster-McGregor N, Isaksson A, Kaulich F (2014) Importing, exporting and performance in sub-Saharan African manufacturing firms. Rev World Econ (Weltwirtschaftliches Arch) 150(2):309–336

    Article  Google Scholar 

  • Foster-McGregor N, Isaksson A, Kaulich F (2015) Importing, exporting and the productivity of services firms in Sub-Saharan Africa. J Int Trade Econ Dev 24(4):499–522

    Article  Google Scholar 

  • Galvao AF, Montes-Rojas G, Olmo J (2010) Threshold quantile autoregressive models. J Time Ser Anal 32(3):253–267

    Article  Google Scholar 

  • Girma S, Görg H (2004) Outsourcing, foreign ownership and productivity: evidence from UK establishment-level data. Rev Int Econ 12(5):817–832

    Article  Google Scholar 

  • Görzig B, Stephan A (2002) Outsourcing and firm-level performance. Discussion Papers of DIW Berlin 309, DIW Berlin, German Institute for Economic Research

  • Hagemejer J, Kolassa M (2011) Internationalization and economic performance of enterprises: evidence from polish firm-level data. World Econ 34(1):74–100

    Article  Google Scholar 

  • Haller SA (2012) Intra-firm trade, exporting, importing, and firm performance. Can J Econ 45(4):1397–1430

    Article  Google Scholar 

  • Halpern L, Koren M, Szeidl A (2011) Imported inputs and productivity. CeFiG Working Papers 8, Center for Firms in the Global Economy

  • Hansen BE (1996) Inference when a nuisance parameter is not identified under the null hypothesis. Econometrica 64(2):413–430

    Article  Google Scholar 

  • Hansen BE (1999) Threshold effects in non-dynamic panels: estimation, testing and inference. J Econ 93(2):345–368

    Article  Google Scholar 

  • Hansen BE (2000) Sample splitting and threshold estimation. Econometrica 68(3):575–603

    Article  Google Scholar 

  • Huber P (1964) Robust estimation of a location parameter. Ann Math Stat 35(1):73–101

    Article  Google Scholar 

  • International Study Group on Exports and Productivity (ISGEP) (2008) Understanding cross-country differences in exporter Premia: comparable evidence for 14 countries. Rev World Econ (Weltwirtschaftliches Arch) 144(4):596–635

    Google Scholar 

  • Jabbour L (2010) Offshoring and firm performance: evidence from French manufacturing industry. World Econ 33(3):507–524

    Article  Google Scholar 

  • Kasahara H, Lapham B (2013) Productivity and the decision to import and export: theory and evidence. J Int Econ 89(2):297–316

    Article  Google Scholar 

  • Kasahara H, Rodrigue J (2008) Does the use of imported intermediates increase productivity? Plant-level evidence. J Dev Econ 87(1):106–118

    Article  Google Scholar 

  • Koenker R, Hallock K (2001) Quantile regression. J Econ Perspect 15(4):143–156

  • Kuan C-M, Michalopoulos C, Xiao Z (2010) Quantile regression on quantile ranges. Available at SSRN: http://ssrn.com/abstract=1869369 or http://dx.doi.org/10.2139/ssrn.1869369. Accessed 13 May 2015

  • Lee G (2005) International R&D Spillovers revisited. Open Econ Rev 16(3):249–262

    Article  Google Scholar 

  • Lööf H, Andersson M (2010) Imports, productivity and the origin of markets: the role of knowledge-intensive economies. World Econ 33(3):458–481

    Article  Google Scholar 

  • Lüthje T (2003) Intra-industry trade in intermediate goods and final goods in a general equilibrium setting. Open Econ Rev 14(2):191–209

    Article  Google Scholar 

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

    Article  Google Scholar 

  • Michaely M (1977) Exports and growth: an empirical investigation. J Dev Econ 4:49–54

    Article  Google Scholar 

  • Muuls M, Pisu M (2009) Imports and exports at the level of the firm: evidence from Belgium. World Econ 32(5):692–734

    Article  Google Scholar 

  • Olley GS, Pakes S (1996) The dynamics of productivity in the telecommunications equipment industry. Econometrica 64(6):1263–1297

    Article  Google Scholar 

  • Olsen KB (2006) Productivity impacts of offshoring and outsourcing: a review. OECD Science, Technology and Industry Working Papers, 200601, OECD Publishing

  • Peluffo A, Zaclicever D (2013) Imported intermediates and productivity: does absorptive capacity matter? A firm-level analysis for Uruguay. Documento de Trabajo 06/13 - Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República

  • Rousseeuw PJ, Yohai V (1987) Robust regression by means of s-estimators. In: Franke J, Härdle W, Martin D (eds) Robust and nonlinear time series analysis. Springer, Berlin, pp 256–272

    Google Scholar 

  • Serti F, Tomasi C (2008) Firm heterogeneity: do destinations of exports and origins matter? In: Piscitello L, Santangelo G (eds) Multinationals and local competitiveness. FrancoAngeli, Milano, pp 167–195

    Google Scholar 

  • Silva A, Afonso O, Africano AP (2013) Economic performance and international trade engagement: the case of Portuguese manufacturing firms. Int Econ Econ Policy 10(4):521–547

    Article  Google Scholar 

  • Sjöholm F (1999) Exports, imports and productivity: results from Indonesian establishment data. World Dev 27(4):705–715

    Article  Google Scholar 

  • Smeets V, Warzynski F (2013) Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade. J Int Econ 90(2):237–244

    Article  Google Scholar 

  • Todd PE (2010) matching estimators. In: Durlauf SN, Blume LE (eds) The new palgrave dictionary of economics, 2nd edn. Basingstoke, Palgrave Macmillan, pp 108–121

  • Tucci A (2005) Trade, foreign networks and performance: a firm-level analysis for India. Development Working Papers 199, Centro Studi Luca d’Agliano, University of Milano

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

    Google Scholar 

  • Verardi V, Croux C (2009) Robust regression in Stata. Stat J 9(3):439–453

    Google Scholar 

  • 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 Econ 35:694–712

    Article  Google Scholar 

  • Vogel A, Wagner J (2010) Higher productivity in importing German manufacturing firms: self-selection, learning from exporting, or both? Rev World Econ 145(4):641–665

    Article  Google Scholar 

  • Vogel A, Wagner J (2011) Robust estimates of exporter productivity premia in German business services enterprises. Econ Bus Rev 13(1–2):7–26

    Google Scholar 

  • Wagner J (2007) Exports and productivity: a survey of the evidence from firm-level data. World Econ 30(1):60–82

    Article  Google Scholar 

  • Wagner J (2012a) International trade and firm performance: a survey of empirical studies since 2006. Rev World Econ 148(2):235–267

    Article  Google Scholar 

  • Wagner J (2012b) Exports, imports and profitability: first evidence for manufacturing enterprises. Open Econ Rev 23(5):747–765

    Article  Google Scholar 

  • Wagner J, Temouri Y (2013) Do outliers and unobserved heterogeneity explain the exporter productivity premium? Evidence from France, Germany and the United Kingdom. Econ Bull 33(3):1931–1940

    Google Scholar 

  • Xu B, Wang J (1999) Capital goods trade and R&D spillovers in the OECD. Can J Econ 32:1258–1274

    Article  Google Scholar 

  • Yasar M (2013) Imported capital input, absorptive capacity, and firm performance: evidence from firm level data. Econ Inq 51(1):88–100

    Article  Google Scholar 

  • Yasar M, Morrison Paul CJ (2007) International linkages and productivity at the plant level: foreign direct investment, exports, imports and licensing. J Int Econ 72:373–388

    Article  Google Scholar 

  • Yohai V (1987) High breakdown-point and high efficiency estimates for regression. Ann Stat 15(2):642–665

    Article  Google Scholar 

Download references

Acknowledgments

The dataset used in this paper is an output of the project EERAF08043 “Survey of Enterprises in Selected ACP Countries”, funded by the European Commission. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the United Nations Industrial Development Organization. The authors are thankful for comments from the editor and three anonymous referees.

Author information

Authors and Affiliations

  1. UNU-MERIT, Keizer Karelplein 19, 6211TC, Maastricht, The Netherlands

    Neil Foster-McGregor

  2. United Nations Industrial Development Organization, Wagramer Straße 5, 1400, Wien, Austria

    Anders Isaksson

  3. Department of Economics, Vienna University of Economics and Business, Welthandelsplatz 1, 1020, Wien, Austria

    Florian Kaulich

Authors
  1. Neil Foster-McGregor
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Anders Isaksson
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Florian Kaulich
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Florian Kaulich.

Appendix 1: Regression results when removing foreign-owned firms

Appendix 1: Regression results when removing foreign-owned firms

Table 9 Ordinary least squares results when removing foreign-owned firms
Full size table
Table 10 Robust regression results when removing foreign-owned firms
Full size table
Table 11 Results using a matched sample of firms (Single nearest neighbour) when removing foreign-owned firms
Full size table
Table 12 Interaction results when removing foreign-owned firms
Full size table
Table 13 Threshold results when removing foreign-owned firms
Full size table

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Foster-McGregor, N., Isaksson, A. & Kaulich, F. Importing, Productivity and Absorptive Capacity in Sub-Saharan African Manufacturing and Services Firms. Open Econ Rev 27, 87–117 (2016). https://doi.org/10.1007/s11079-015-9367-7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11079-015-9367-7

Keywords

  • Importing
  • Productivity
  • Sub-Saharan Africa
  • Absorptive capacity
  • Human capital

JEL Classification

  • D24
  • F10
  • M20
  • L10