Home-market economic development as a moderator of the self-selection and learning-by-exporting effects

Abstract

Prior research suggests that firm productivity and export activity are mutually reinforcing. Highly productive firms are more likely to enter the export market (i.e., self-selection), and upon doing so, achieve greater productivity levels over time (i.e., learning-by-exporting). We consider how a critical yet unexamined factor impacts this relationship: the economic development of a firm's home market. Drawing on institution-based theories, we hypothesize that self-selection effects will be strongest among firms in more developed economies. Drawing on knowledge-based theories, we hypothesize that learning-by-exporting effects will be strongest among firms in less developed economies. Taken together, we posit that firm productivity and export activity indeed reinforce one another; however, the strength of each direction of the relationship will be amplified, at least in part, by the presence of the opposite home market economic conditions. Analysis of longitudinal data from the World Bank Enterprise Surveys composed of responses from 3,431 manufacturing firms across 63 countries from 2006-2017 supports the proposed hypotheses.

Organisational capabilities and small and medium sized firms’ attainment of innovation outcomes: the moderating roles of exports and formal business networks

“…Nevertheless, we encourage researchers to explore this possibility to join the efforts to reconcile the learning-by-exporting and export propensity literature (e.g. Vendrell-Herrero et al. , 2022) further in future studies.…”

Performance from building smart factories of small- and medium-sized enterprises: the moderating effects of product complexity and company size

“…Labor cost was used as labor input, and the net book value of machineries, vehicles, buildings and land were used as capital inputs. Total cost was used as intermediate inputs, and the revenue was used as the substitute for output (Levinsohn and Petrin, 2003; Vendrell-Herrero et al. , 2022).…”

“…There are two primary theories that connect productivity and export: self-selection and learning by exporting. These theories maintain that productivity and export are complementary (Wagner, 2007) and that they mutually strengthen each other (Vendrell-Herrero et al, 2022). Self-selection is a theory claiming that companies with high productivity are more likely to enter the export market.…”

“…Labor cost was used as labor input, and the net book value of machineries, vehicles, buildings and land were used as capital inputs. Total cost was used as intermediate inputs, and the revenue was used as the substitute for output (Levinsohn and Petrin, 2003;Vendrell-Herrero et al, 2022). The variables such as labor cost, the net book value of machineries, vehicles, buildings and land, total cost and revenue were measured by including the questions that asked respondents to fill in their own accounting figures in the survey.…”

“…Vendrell-Herrero et al. (2022) reviewed the more nuanced relationship between firm productivity and export activity by analyzing the moderating effect of the domestic market's economic development.…”