Exporting, investing and productivity dynamics in African manufacturing

Abstract

Trade shocks generated by trade policy reform are important for firm productivity. In particular, export opportunities and access to imported intermediate inputs and capital goods can encourage firms to simultaneously export and invest. Using a panel dataset for manufacturing firms in Ghana, Kenya, Nigeria, and Tanzania, I find strong and robust evidence for learning-by-exporting effect. I also find that firms that simultaneously export and invest have the highest returns to these activities compared with firms that export without investing, or firms that invest without exporting, or firms that do neither activity. The superior productivity performance of firms that engage in both activities is consistent with the idea that exporting and investing have complementary effects on a firm’s productivity: investing facilitates a firm’s ability to absorb export-related technology. Finally, I find that firm heterogeneity has important influence on the productivity gains associated with exporting and investing.