Changing export status and firm performance: evidence from UK small firms

Abstract

The export premium is measured for a sample of 1940 small-sized UK manufacturing firms over the period 1994–2000 by evaluating the performance of entrants versus exiters in the foreign markets. It is found that new exporters witnessed a substantial increase in their employment, wages, sales and productivity growth rates compared to non-exporters. On average the estimated export premium coefficient varied from 5% in productivity to 1% in wages. Companies that interrupt the exporting activity suffered significant losses in employment, employees’ wages, director's wages, sales and productivity. The negative estimated impact on the growth rates vary from −7% for director's wage to −3% in employment and productivity.

Acknowledgements

This paper is part of Chapter 1 of my thesis at the London School of Economics. I thank Anthony Venables, John Van Reenen, Chris Milner and James Walker and the participants of the seminar at LSE (UK, 2001) and Frontier Economics (UK, 2001) and the conference of the Royal Economic Society (UK, 2001) for comments and suggestions. Funding from Generalitat Valenciana (GRUPOS03/151, GV04B-070) is gratefully acknowledged.

Notes

An equivalent specification is Δ y_it equals; γ_1t x_{it  − 1} + γ _2t x_it  + γ _3t x_{it − 1} x_it  + λ z_it  + Δ u_it where α _1t equals; γ _1t, α_2t equals; γ _2t , α _3t equals; γ _1t + γ _2t + γ _3t , where x_it and x_{it − 1} is the export status of firm I in period t and t−1, respectively.

With the exception of return on sales, which unlike the other performance variables is not strictly positive, are measured in natural logs in the regression analysis.