Market size, productivity and product quality regarding firm heterogeneity

Abstract

The importance of market scale really affects a set of economic orientations in real world, such as economic structure, trade patterns, competitive behaviours of firms, and decisions of government policies and enterprises, etc. Simultaneously, considering the production efficiency and product quality as the productivity calculation of one firm, our expanded model tries to answer how does the market scale of the world affect the operation and survival of enterprises and how does the asymmetrical market scales derive the changes of firms' exporting decisions. Our article gets the following two results. When the global market expands, we find that those combinations of production efficiency and product quality originally unable to serve the domestic market or be exported are turned to meet domestic or export demand. Next, the effect of the asymmetric scale between two countries' markets would derive the four areas which describe different export decisions under various production efficiency-product quality combinations. This explains that reasonable combinations of production efficiency and product quality will be the critical point to export.

Gauteng Enterprise Propeller's Support on Manufacturing MSMEs in Gauteng

“…Firms are heterogeneous, as they differ in size, productivity, human capital, skill intensity and other characteristics that make them unique (Lin & Weng, 2019). These firm characteristics are closely linked to the technological capability and competitiveness of a firm.…”

Productivity Premia and Firm Heterogeneity in Eastern Africa

“…Next, we discuss the four types of firms in terms of their productivity distribution. Exporting firms (irrespective of ownership type) are more productive than non-exporting firms (e.g., see Lin and Weng, 2019;Davies and Jeppesen, 2015), whereas locally-owned firms are less productive than foreignowned firms (Demena, 2017). Our sampled firms confirmed this, suggesting domestic market-oriented firms (locally-owned firms) are less productive than exporting firms (foreign-owned firms).…”