Exporting and Firm Performance: Evidence from a Randomized Experiment*

Abstract

We conduct a randomized experiment that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 16–26% higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after controlling for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs and same capital equipment, treatment firms produce higher quality rugs despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.

The Drivers of Income Inequality in Rich Countries

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High-Growth Firms: Facts, Fiction, and Policy Options for Emerging Economies

“…16 The spillover benefits from FDI are well documented in the literature and include transfer of technology and managerial knowledge, either directly through supplier networks or indirectly through demonstration effects (Djankov and Hoekman 2000;Görg, Strobl, and Walsh 2007;Arnold and Javorcik 2009). Participation in global markets through exporting, particularly as part of global value chains, offers similar benefits as well as diversification of the customer base and quality upgrading through learning-by-doing (Atkin, Khandelwal, and Osman 2017); product shedding, which forces firms to focus on their core competency (Bernard, Jensen, and Schott 2006); and enhanced access to higher-quality intermediate inputs (Goldberg et al 2010).…”

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