Exporter performance in the German business services sector

Abstract

A wide range of empirical studies has analysed exporter performance, especially the relationship between exports and productivity in the manufacturing sector. By contrast, a detailed investigation of the services sector has remained largely neglected. To close this gap this paper focuses on the relationship between exports and several performance characteristics in the German business services sector – average wage, productivity, size, and turnover profitability – in order to determine whether export premia and self-selection into export markets exist in the business services sector. To ensure the comparability of the results with those from the manufacturing sector, empirical models used to analyse the manufacturing sector are transferred to investigate the business services.

Keywords:

• export performance
• export premia
• productivity
• export markets
• business services

Acknowledgements

The access to the business services statistics panel was provided via remote data access at the Research Data Centre of the Statistical Office of Berlin/Brandenburg. For more details about the data access, see Zühlke, Zwick, Scharnhorst, and Wende (2004). All calculations were performed using Stata 10. All do-files are available from the author on request. Many thanks go to Joachim Wagner and two anonymous referees for helpful comments and to the employees of the Research Data Centre of the Statistical Office Berlin/Brandenburg for running the do-files and checking the voluminous output for any violations of privacy.

Notes

Unless otherwise stated, business services are defined in this paper as NACE divisions 72 (e.g. hardware and software consultancy, data processing, software publishing, and database activities), 73 (i.e. research and development), and 74 (e.g. business, management and tax consultancy, advertising, legal activities, market research, and architectural and engineering activities).

According to the German balance of payments, business services (defined as advertising, engineering, commercial, and computer services) have by far the highest trade volume of any service other than travel and transport (cf. Deutsche Bundesbank, 2009). In addition, Jensen and Kletzer (2006) classified nearly all business services as tradable, based on the geographic concentration of service activities in the USA.

The panel contains fewer than 15 business services enterprises that began exporting in 2003 and had no exports between 2000 and 2002, and fewer than 25 business services enterprises that began exporting in 2004 and had no exports between 2001 and 2003.

In the case of multinational companies, the turnover of foreign subsidiaries is excluded.

Some additional notes: In all analyses, values are stated in 2003 prices. To avoid bias by outliers, the 1st and 99th percentiles of the wage, turnover profitability, and value-added distributions, as well as the 99th percentile of the distributions of turnover and employed persons are excluded from all computations. Finally, the federal state of Berlin is included in the East Germany analysis.

A more detailed presentation of the export participation between 2000 and 2005 based on the cross-sectional business services statistics can be found in Eickelpasch (2008).

Both the pooled regression and the fixed effects model are estimated with cluster robust standard errors, relaxing the assumption of independence of the observations. Independence is assumed only between enterprises. To control for unobserved, time-invariant heterogeneity, a first differences model was also estimated. Because the results were similar to those of the fixed effects model, these results are not presented.

In addition to the self-selection hypothesis, it has been hypothesised in the literature that exporting improves the performance of the enterprises (cf., e.g. Bernard & Jensen, 1999). The manufacturing sector has demonstrated only mixed evidence concerning this hypothesis (cf., e.g. Wagner, 2007). However, because the dataset covers only a short time period, it is not possible to test this learning-by-exporting hypothesis.