Exports-performance relationship in Russian manufacturing companies: Does foreign ownership play an enhancing role?

Anna Bykova (National Research University Higher School of Economics, Moscow, Russia)
Felix Lopez-Iturriaga (University of Valladolid, Valladolid, Spain) (National Research University Higher School of Economics, Moscow, Russia)

Baltic Journal of Management

ISSN: 1746-5265

Publication date: 2 January 2018



The purpose of this paper is to examine the relationship between export activity and firm performance for a positive impact of foreign direct investments (FDIs). The authors also analyze two possible causes of the effect: technology transfer and financial support. The theoretical background is rooted in the resource-based approach taking into account multinational companies’ perspective and the specifics of emerging markets.


The authors propose testable hypotheses based on a review of the theory. To test the hypotheses, the authors build a sample of over 500 Russian public manufacturing firms covering the period from 2004 to 2014 and estimate regression models. Given concerns about endogeneity, the instrumental variable approach for panel data, using the GMM-estimator, is implemented.


Consistent with the view that FDIs generate spillover effects, the results support the positive impact of foreign ownership on the link between exports and firms’ performance. The results underline the importance of foreign ownership: shareholders from developed countries can provide benefits to exporting companies through transferring advanced technologies and loosening financial constraints by lowering interest and raising availability of bank loans.


The authors provide new insights on the relationship between exports and firm performance. Given our focus on Russia, a market with high potential to draw foreign investments, the research sheds some light on how emerging country firms can benefit from having foreign shareholders with paying attention to geographical distribution of such investments. Specifically, through the overcoming of technological barriers and loosening of financial constraints, the authors show empirically that foreign capital can make up for weak local institutional infrastructure and enhance the company’s returns from internationalization.



Bykova, A. and Lopez-Iturriaga, F. (2018), "Exports-performance relationship in Russian manufacturing companies", Baltic Journal of Management, Vol. 13 No. 1, pp. 20-40. https://doi.org/10.1108/BJM-04-2017-0103

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1. Introduction

The effect of firms’ internationalization on corporate performance is a long-standing phenomenon in the business strategy (Hitt et al., 2006; Lu et al., 2014). Since the seminal works of Bernard and Jensen (1999) and Melitz (2003), the mainstream view has been that exporting is one of the pathways to overcome the fixed costs associated with entry into foreign markets. Exporting is seen as a relatively easy and rapid foreign market entry mode, requiring reduced financial and human resources. Previous research has focused on the differences in firms’ involvement in exports and the determinants of foreign trade participation. In contrast, there is little in the way of systematic evidence to confirm how firms actually connect with foreign customers and suppliers, as well as the factors that can help them do so, especially in developing countries. Among the papers that do exist, there are a few that highlight the significant link between exports and firms’ financial results when taking into account different internal and external factors, i.e., the size and age or institutional environment (Li et al., 2017). However, ownership structure, as a whole, and foreign ownership, in particular, have almost been neglected in the literature as drivers of the relationship between internalization and performance.

We try to fill this gap by addressing the enhancing role of foreign ownership in the exports-performance relationship involving Russian firms, while testing the hypotheses on the way in which foreign ownership provides domestic affiliates of multinational enterprises (MNEs) with access to additional competitive advantages through connections with foreign shareholders. These advantages help firms to achieve better levels of performance from exporting. We assume that foreign equity indirectly affects the relationship between exports and corporate performance. We also address the underlying factors that make foreign ownership substantial in such a relationship by addressing the technological and financial advantages of the countries from which foreign shareholders come.

This issue is especially important for emerging countries, since national economic development and international competitiveness strongly depend on how firms are built on global value chains and improve the internal resources within the context of their activity (Filatotchev et al., 2008). Russia is a suitable environment in which to analyze this topic for several reasons. First, exports by Russian firms increased by around 250 percent between 2004 and 2013, which equates to the second highest growth in exports for G20 countries. According to the study of 500 Russian manufacturing firms, the share of exporting firms is four times higher for foreign-invested companies than domestic-invested firms, and almost twice as high as the average of the sample (Golikova and Kuznetsov, 2016). At the same time, Russia has different characteristics compared to developed countries and other emerging economies, where the effect of internationalization has been studied. Second, since 2012, Russia has undertaken enormous trade and foreign direct investment (FDI) liberalization. As a result, Russia became one of the three largest recipients of inward FDI in 2013 (UNCTAD, 2013). Finally, given the results of their meta-analysis on Russian studies, Iwasaki and Mizobata (2017) concluded that the number of works on the topic is still limited and does not allow for analysis over time, which in turn implicates a number of caveats for studying this topic.

We analyze a sample of more than 500 non-financial listed Russian firms in the period from 2004 to 2014. Our results show that exporting companies with foreign shareholders outperformed their counterparts with purely domestic capital. We also find that the origin of foreign ownership is relevant, since this positive effect is especially strong in countries with a higher degree of technological development or more developed capital markets. In turn, technology acquisition or the loosening of financial constraints with the help of shareholders from developed markets seems to be an effective mechanism leading to the impact of foreign ownership, which improves the performance of exporting firms from developing countries. These results are robust across different specifications of firm performance, foreign ownership and alternative model specifications.

The remainder of this paper is structured as follows. Section 2 provides a brief overview of the extant literature on the link between exports and firms’ performance, as well as the role of foreign ownership as a moderator of this link. This section also introduces the hypotheses to be empirically tested. Section 3 outlines the methodological framework and the sample, while Section 4 tests the hypotheses, before presenting and discussing the results. Conclusions are given in the final section.

2. Literature review

The existing literature has covered, from both a macroeconomic and a microeconomic point of view, the relationship between export and performance in the context of emerging markets, along with the role of foreign ownership as an enhancer of this link. First, we review the research on the direct impact of exports on business performance; continue with the moderating effect of foreign equity ownership and the mechanisms through which foreign ownership moderates such a relationship.

2.1 The link between exports and company performance: ambiguous evidence

In the global economy, international trade and FDI are regarded as key elements driving the sustained economic growth in developing countries (Virakul, 2015). Much has been written on the nexus between international trade and growth at the macro level and on export-led growth strategies. However, Melitz (2003) raises the question about why exporters may be more productive than non-exporters, if they both experience the same external conditions. Bernard et al. (2007) emphasized that the answer may be found from a microeconomic perspective and show that the significant differences in the performance of companies are strongly correlated with the decision to participate in international transactions.

The empirical evidence is still not enough for the developing world (Claessens and Yurtoglu, 2013). Using data on 27 transitional economies, Gorodnichenko et al. (2010) showed that export leads to innovative activity growth. Vaatanen et al. (2009), meanwhile, analyzed emerging Russian multinational companies, showing that international activity has a significant effect on performance. Similarly, Golikova et al.’s (2012) survey of 1,000 Russian companies confirmed that strong competition in foreign markets had forced them to implement innovations, resulting in better performance. At the same time, a number of studies have failed to observe the performance gap between exporters and local market companies, even identifying negative impacts in some cases. In particular, Aw et al. (2007) and Li et al. (2017) were unable to recognize any differences in the corporate performance of South Korean manufacturing, whereas Shcherbakov (2012) found that the relationship between the degree of internationalization and the performance of 50 Russian companies, in the period from 2005 to 2010, had a non-linear shape, while almost all companies are located in the negative part of the curve. One of the possible reasons for this relates to the low-level endowment of specific resources (Shakina et al., 2017). Firms do not have the ability to learn from foreign markets and cannot overcome the “sunk costs” phenomenon, which is significantly relative to firms’ own capacity to support them.

In summary, we still lack a generally accepted model of the relation between exports and performance for developing countries. Based on the reviewed literature, we can conclude that the foundations of the resource-based view (Barney, 1991) offer a suitable theoretical explanation for why MNEs’ affiliates may outperform domestically oriented firms, given that this framework emphasizes the importance of firm-specific resources when generating and maintaining sustainable competitive advantage (López Rodríguez and García Rodríguez, 2005). To obtain a better understanding of the phenomenon of internationalization in developing countries, a certain match between a firm’s resource base, FDI injections and its performance is needed.

2.2 The antecedents of the strengthening effect of foreign ownership

Despite a number of studies identifying several firm resources (i.e. demographic, structural, organizational and managerial) as determinants of the internationalization and performance link, there is little evidence about foreign ownership, which is of particular importance to developing countries (Stepanov and Suvorov, 2017). Moreover, previous literature has mainly focused on the direct, rather than the moderating, effect of foreign ownership on exports and performance. Greenaway et al. (2007) observed the positive influence of FDI on return on assets (ROA); Mihai and Mihai (2013) made the same observation with regard to Romanian firms. On the contrary, Fatima (2016) found that FDI horizontal linkages decrease company productivity. Bessonova et al. (2003) reported that for Russian firms the share of FDI in capital has not influenced company productivity, especially after the 1998 crisis. Yudaeva et al. (2003) observed that foreign firms are more productive than domestic ones. The results from analyzing large amounts of panel data on firms from 28 CEE countries with high institutional development variation from 2002 to 2009 highlighted a positive relation between foreign ownership and export and employment growth (Balsmeier and Czarnitzki, 2014). A recent study from Boddin et al. (2017), using an international sample of 30 developing countries, including Russia, concluded that foreign ownership significantly increases the propensity of firms to engage in international trade, by 17.6 percentage points. The FDI spillover effect is especially strong for firms in low-income countries.

However, as shown by Filatotchev et al. (2008), exports and returns from this activity are closely associated with ownership structure, particularly with foreign shareholders. The last is considered as an internal resource for boosting expansion by developing export infrastructure, accumulating general knowledge in export operations or training specialists in firm exports overseas, which, in turn, will improve the competitiveness of the firm (Huang et al., 2013). A lack of foreign presence consequently leads to inferior knowledge of foreign markets and reduced “market access spillovers,” i.e. access to a broader array of financial opportunities to fund investments and innovations (Buckley et al., 2010). At the same time, according to Lensink and Naaborg (2007), the lower performance of foreign banks could result from the existence of information asymmetry, which induces the foreign parent to only approve low-risk credit proposals submitted by the foreign subsidiary.

Based on the conflicting evidence, we expect that, as a mechanism to exploit the value of internal resources, exports generate more performance when not only domestic but also foreign shareholders own the company. Therefore, given the lack of a backdrop of previous studies concerning the indirect effect of foreign ownership on the export-performance link, we explore the following main hypothesis:


Foreign ownership has a positive moderation effect to relationship between exports and corporate performance in Russian manufacturing firms.

2.3 The mechanisms leading to foreign ownership impact

Recent research has shown that a large part of this effect belongs to the effect of the country of ownership origin (i.e. Nepelski and De Prato, 2015; Wignaraja, 2012). It has been argued that the higher the technological gap between the home and host countries, the stronger the effect. Iwasaki and Mizobata (2017) observed the strong positive effect of foreign investors from technologically and financially more advanced countries. Despite the amount of research on the foreign ownership and corporate performance link, the exact mechanisms by which FDI facilitates the exports-performance relation are still not well understood.

Given the emphasis on increasing the competitiveness of foreign affiliates with the specifics of developing countries, in our paper we investigate two mechanisms related to the country of origin effect, which can improve firms’ resource endowment and foster the link between exports and performance: namely, technology acquisition, through which technologies and managerial practices are imitated, and the loosening of financial constraints by providing better access to external finance via connections that foreign shareholders have (Manova and Zhang, 2009).

A related strand of literature, which draws on innovation and learning processes in developing countries, refers to technologies acquisition from developed countries as being a major source of export advantage at the firm level (Belitz and Mölders, 2016). MNEs “meet” local firms with new technologies, which they do not know or where it is too costly for them to be introduced. Wignaraja (2012) found that for 205 clothing enterprises in Sri Lanka domestic technological activity and FDI from developed countries are complements, rather than substitutes. Nepelski and De Prato (2015) noticed that there is an increasing demand among external actors for technological development in developing countries. However, Golikova and Kuznetsov (2016) showed that, in the case of 500 Russian firms involved in eight manufacturing industries, foreign investors do not consider their affiliates as part of the value chain, which is why they have no incentives to improve technologies. In their study on Indonesian firms, Blomstrom and Sjöholm (1999) found that MNEs failed to facilitate technology diffusion for local affiliates. Similarly, Suyanto and Salim (2013) found evidence that FDI decreases the technical efficiency of local Indonesian pharmaceutical firms. Wooster and Diebel (2010) found no evidence of any statistically significant spillover effects in a meta-regression analysis of 32 spillover studies of developing countries. In addressing this controversial evidence, we state our second sub-hypothesis as follows:


The level of technological availability in the largest foreign shareholder’s country of origin positively moderates the relationship between exports and firms’ performance.

There is consensus in the literature that underdeveloped domestic capital markets can constrain the international expansion of firms. Beck (2002) concluded that foreign owners might provide better access to external finance, allowing firms to more easily bear the fixed costs of exporting, given that developing countries tend to have poorly developed financial markets, resulting in limited financing opportunities for firms. In this sense, the financial profile of a country can be defined either as bank oriented or as market oriented. Based on a sample of Spanish firms, Campa and Shaver (2002) found that, relative to non-exporters, exporters enjoy a more stable cash flow and, therefore, capital investment. Foreign shareholders can ease access to financial funds and loosen financial constraints. Alvarez and López (2013) demonstrated that financial development increased the probability of exports in Chilean manufacturing sectors with foreign ownership. However, De Rosa (2006), for all Russian companies with more than 100 employees for the period 1996-2000, failed to discover that the presence of foreign owners was significant in determining both export propensity and intensity, thereby confirming that FDI is not usually intended for increasing financial resources. Girma et al. (2004) found the same results when studying the role of foreign ownership and financial constraints in Chinese firms, with an emphasis on innovation activity. Minetti and Zhu (2011) proved that firms with foreign ownership have lower levels of liquidity, which in turn depress both domestic and foreign sales and reduce the probability of exporting. Accordingly, our second sub-hypothesis can be stated in the following way:


The availability level of financial resources (either banks or capital markets) in the largest foreign shareholder’s country of origin positively moderates the relationship between exports and firms’ performance.

3. Data, variables and method

3.1 Data

Our database provided by the Ruslana from Bureau Van Dijk and was complemented with more firm-level data, which concern ownership structure and corporate exports from public sources. Our sample is made up of 518 Russian public firms (on average) covering the period from 2004 to 2014, which amounts to 5,702 firm-year observations. According to the Federal State Statistics Service, 2017 (Rosstat), the whole population of public companies who disclose their information consists of 2,700 companies. Our sample covers around 20 percent of the whole population and represents all key players in the country as most important companies disclosing the information are in the sample. The proportion of exporters in our sample is around 60 percent of firms. More than half of the firms occasionally exported in the last three years. We identify the outliers using the system of multivariate outlier detection (Hadi, 1994). For a firm to be included in our database, we require the firm to be once listed and active as of 2004 and to have been active for at least seven years.

We focus on manufacturing firms because, contrary to other large Russian exporting industries, such as oil and minerals, the manufacturing sector is the one that most adds value and, in turn, has the ability to implement the advantages brought in by foreign shareholders. Furthermore, according to Russian macroeconomic statistics, manufacturing holds the leading position in terms of foreign investment attractiveness. The number of projects when a foreign investor acquires more than a 10 percent share of the company’s equity reached 171 in 2014.

Rosstat reports that Russian companies exported 30 percent of GDP in 2012. According to the UNCTAD classification, the share of high-skill and technology-intensive manufacturing increased from 30 to 41 percent between 2004 and 2014. Microeconomic data show that manufacturing companies are quite heterogeneous, while 89 percent of exporters are firms with foreign capital (Golikova and Kuznetsov, 2016).

The distribution of the sample according to the manufacturing sub-sectors is shown in Table I, in line with the three-digit level North American Industry Classification System (NAICS) classification. Apart from the sample’s skeweness to large companies, our sample is representative in terms of sector distribution of Russian manufacturing economic sectors.

As can be seen in Table II, only 7 percent prioritize the export of their products to Community of Independent States (CIS) countries, whereas 23 percent export to developed markets and 35 percent have chosen emerging markets as their priority.

3.2 Model and variables

Since we are interested in testing the moderation effects, a number of interacted variables has been defined, which combine export activity with ownership structure, such as FOCCit×EXPit. Thus, the baseline model can be expressed as a linear panel model with individual effects as follows:

(1) C o r p P e r i t = α 0 + α 1 E X P i t + α 2 F O C C i t + α 3 E X P i t × F O C C i t + α 4 C o n t r o l s i t + ε i t
where CorpPerit represents the performance of firm i in year t, EXPit represents the company exports activity of firm i in year t, FOCCit represents the foreign control ownership of firm i in year t, FOCCit×EXPit represents the interaction effect between foreign ownership and exports activity of firm i in year t, Controlsit represents the control variables of firm i in year t, and εit represents the error term of firm i in year t.

3.2.1 Dependent variable

Firms’ performance has been measured using two accounting-based indicators commonly used in corporate finance studies such as Guner et al. (2016), Gedajlovic et al. (2005) or Kumar (2004). According to Mashayekhi and Bazaz (2008), such measurements, presenting the managerial actions outcome and fundamentals of business performance in a holistic way, are preferred over other indicators for corporate governance and firm performance research. We use the ROA, which is a measure of the operational efficiency as the most popular accounting-based metric according to the Al-Matari et al.’s (2014) study. For robustness check, we use another accounting measure, namely the return on equity (ROE).

3.2.2 Independent variables

To enhance the comparability of our results with previous research and given our focus on the differences between exporting and non-exporting firms, we follow the recent studies by Munch and Schaur (2018) and Gibson and Pavlou (2017) and define exports as a dummy variable, which equals 1 if the firm has exported in period t, and 0 otherwise. A review of theory demonstrated that even the dichotomous exports variable could capture various effects of internationalization. Thus, Greenaway et al. (2007) showed that entering the international market changes the firm’s behavior: companies start to prefer implementing modern technologies, including foreign ones. Yang et al. (2009) used an exports dummy and discovered that for Chinese companies merely starting to export can be an important source of competitive pressures, information and other productivity advantages for firms, leading to significant performance improvements. Balsmeier and Czarnitzki (2014) demonstrated the evidence of the positive influence of export status on different performance indicators for companies from Central and Eastern Germany. Kalyvitis et al. (2016) received similar results for both export dummy and export intensity indicators, studying Greek companies over the period 1999-2007. Moreover, as several studies about Russia (i.e. Golikova et al., 2008; Gonchar and Marek, 2014; Kuznetsov et al., 2011) have concluded, the mere fact that a company engages in exports might be a signal indicating that the firm outperforms its competitors.

For robustness checks, we define an additional metric of exports, called sustainable export. This second dummy variable equals 1 if the firm has exported in each one of the last three years as suggested by Arnold (2015). The same approach was implemented for Russian companies by Golikova et al. (2012) who showed that sustainable exporters obtain higher returns from internationalization than firms exporting occasionally due to having constant incentives to implement new technological and organizational innovations.

Foreign ownership is operationalized through a dummy variable, which equals 1 if a foreign shareholder owns at least 25 percent of shares (Du and Girma, 2012). This threshold is based on the idea that foreign shareholders have incentives to implement strategic changes when they have a high enough fraction of shares. Given the high ownership concentration of Russian firms, this assumption is consistent with Sarkar and Sarkar (2000), who showed that institutional investors only have a positive impact on firms’ performance when their stake is higher than 25 percent.

For robustness checks, we use another dummy for foreign ownership, which equals 1 when the firm has foreign shareholders, irrespective of the fraction of shares as well as continuous variable foreign ownership as a percentage of foreign ownership in shareholder capital.

Regarding our second research question, we introduce variables related to the technological and financial advantages provided by foreign shareholders. In their theoretical model, Helpman et al. (2008) highlighted that productivity growth is endogenous and influenced by firms’ innovation decisions. For firms that export, success in global markets is closely related to the development of capabilities and technological opportunities, which are not necessary for success in the domestic market. We based our work on the approach suggested by Chen (2011) and Jara-Bertin et al. (2015) and matched country-level data from the World Bank with regard to research and development expenditures with firm-level information. We define technology availability as a dummy variable, which equals 1 when the largest foreign investor’s country of origin is above the mean technological level, and 0 otherwise.

As far as financial development (either bank development or capital markets) is concerned, we refer to the information issued by the World Bank on domestic credit provided by the financial sector and on the market capitalization of listed companies (both as a percentage of GDP). In the same way, we define two dummy variables, namely, bank capital and market capital, when the country of origin of the largest shareholder is above the mean level of the credit provided by the financial intermediaries or market capitalization; otherwise, each variable equals 0.

3.2.3 Control variables

According to the literature, there are a number of factors that can affect the influence of exports on firm performance. First, we use a dummy variable relating to export direction. In general, it can be expected that companies exporting to markets that are more sophisticated benefit from their activity in more challenging contexts. Therefore, the variable equals 1 if the firm has exported to developed countries in period t; otherwise, it is 0. The definition of developed countries is based on the list issued by the UN (WESP, 2016) and assumes that firms learn more from partners in those countries than those from developing ones. The use of this variable is based on Barrios et al. (2005) who found evidence that Spanish firms benefitted from research and development spillovers resulting from exporting to OECD countries. Damijan et al. (2013) reported that productivity only increases significantly when exporting to advanced foreign markets. In this vein, Shevtsova (2012) found that Ukrainian firms which export to the EU and other OECD countries achieve higher levels of benefits in terms of their total factor productivity than firms entering the CIS countries. Brambilla et al. (2017) observed that, for Argentinian companies, the geographical export structure has an impact on human capital quality and average wages. However, for Russian and CIS firms, Wilhelmsson and Kozlov (2007) only obtained positive results for labor productivity for the first year of exporting to OECD countries, compared to CIS countries.

The effect of firm size is an empirical issue. On the one hand, the export efficiency of larger firms is likely to be higher than smaller firms on the grounds of resource availability, higher capacity for taking risks, better access to financial funds, easier building of foreign networking relationships, and lower transaction costs. However, smaller firms could perform better in foreign markets because of their inherent flexibility. In line with Babakus et al. (2006), we use the number of employees (natural logarithm) as an indicator of firm size.

Age refers to experience in learning and knowledge (Williams and Shaw, 2011). Some young firms are more successful in dealing with new technologies, which can provide important tools for the success of exports. Nevertheless, old firms might enjoy higher returns because of their experience and ability to build a global network. We estimate the age of the company using the date of incorporation.

Intangible assets reflect the specific company resources that allow for higher diversification and the generation of abnormal financial results. As reported by Malone and Rose (2006), companies with high level of intangibles and FDI are able to demonstrate the positive benefits of internalization. The study by Bontempi and Mairesse (2015) goes beyond the impact of purely capitalized intangible assets.

Employee costs also refer to firms’ resources involving human capital. Franco and Gelübcke (2015) observed statistically significant differences in wages per employee in 2007-2008 for Central and East German service companies that exported and were owned by foreign and domestic shareholders.

There are also a number of industry-level factors that potentially affect the above-mentioned relationship (Zou and Cavusgil, 2002). Industry technological intensity is another industry-level factor affecting the competitiveness of an industry and, consequently, the ability of firms to enter foreign markets. Firms with a high degree of “research effort” tend to export a higher proportion of their output. Thus, Du et al. (2012), who analyzed Chinese listed companies, found that export activity does not influence firms from mature and low-tech industries, whereas a strong positive effect was observed for companies from medium- and high-tech sectors. According to technological intensity, we group our companies into three clusters using the OECD classification: high-, middle- and low-technology industries (OECD, 2011).

Industry concentration may be important since it reflects the level of competition in an industry. As shown by Zhao and Zou (2002), in highly concentrated industries, a few large firms enjoy a high degree of market power. We operationalize industry concentration using a Herfindahl-Hirschman index (HHI) for the four-digit level of the NAICS. The HHI was estimated based on the data on all firms’ population, which is available from the Ruslana database, covering more than 90 percent of Russian companies.

Industry dummies reflect the classification of each firm into one of the manufacturing sub-sectors, as identified by the NAICS. It is argued that firms are constrained to a certain degree, particularly in the short term, by opportunities available to the industry as a whole. Having formed ten aggregate manufacturing industry groups, we constructed nine dummy variables, where group 10 is the reference group. Finally, we control unobservable macroeconomic effects via dummy variables for years and the economic development of different regions using the gross regional product (GRP) per capita. As noted in Arnold and Hussinger (2010), the GRP per capita coefficient can be a proxy for economic performance and heterogeneity (or convergence) of regions.

A key methodological issue when testing the link between firms’ performance and exports is possible endogeneity, i.e., the causality of the link. This can be due to exports being affected by corporate performance or being correlated with unobserved firm characteristics, which influence a firm’s performance. To address such an issue, we use the instrumental variable approach for panel data, as found in several similar studies (Baum et al., 2007; Caldera, 2010; Hansen, 2010). This involves selecting suitable instruments (Roberts and Whited, 2013). The instruments should be correlated with exports and not have any direct impact on the dependent variable. Following Mody and Ohnsorge (2007) and Park et al. (2010), we use one-year lagged exports since it is expected to affect exports, but not domestic sales and corporate performance of current year.

In Table AI, we present definitions and method of estimation for all the variables.

4. Results

4.1 Descriptive statistics

Some descriptive statistics are reported in Tables III (continuous variables) and IV (dichotomous variables), according to the exporting criterion (work on foreign or local markets). Table III shows the mean, quartiles and standard deviations of the variables, along with a test of means comparison between exporters and non-exporters. As we can see, exporting companies are larger, and have more intangible assets and larger employee costs, along with a higher share of foreign ownership. Moreover, exports are related to better corporate performance: the differences in ROA and ROE are statistically significant, meaning that exports directly contribute to business performance. At the same time, exporting companies do not necessarily enjoy a more productive experience on the market, as the differences in age are not statistically significant.

The results given in Table IV are consistent with the view that exporting and non-exporting Russian companies have different ownership structures and different industry characteristics. Exporting firms often have more foreign shareholders than their non-exporting counterparts, and operate in high-tech and highly concentrated industries. The evidence is similar to that presented by Oxelheim and Randoy (2003), who indicated that foreign ownership is significantly more important for exporting manufacturing firms, due to highly significant capital costs for these industries.

From Table V, we can say that the correlations among the independent variables are generally low; mean that multicollinearity is not a problem in our estimates. At the same time, in broad terms, the correlation matrix confirms the results of the test of means comparison by showing the correlation between exports and some firm- and industry-level factors. For instance, exports positively correlate with different metrics of foreign ownership as well as working in concentrated and high-tech industries.

4.2 Explanatory analysis

We run the baseline model in which the dependent variable is a firm’s performance. To check the specific effect of foreign ownership on exporters’ performance, we facilitate the interaction between exports and foreign ownership. In all the models, we control for time and industry effects with a set of year and industry dummy variables. The results of the estimations are presented in Table VI.

First, we can claim that one-year lagged exports represent a relevant instrument for this model based on the results of underidentification (p-value in Anderson’s canonical correlation LM test is 0.001), weak identification tests (Cragg-Donald Wald statistic equals >10 in each regression) and the Sargan test (the null hypothesis is accepted everywhere).

From the basic specification of the model, there are several relevant issues to consider. First, as the interaction term of export and foreign ownership is positive and significant; we can confirm our H1 and suggest that foreign ownership increases the strength between exports and performance. This, in turn, means that firms with a large stake of foreign ownership enjoy positive spillovers from their shareholders, thereby providing opportunities to overcome fixed costs of exporting and receive positive returns in performance. Huang et al. (2013) reached similar outcomes for a large sample of developing countries, while scholars such as Lensink and Naaborg (2007) found the opposite results.

Furthermore, the fact that being an exporter per se does not significantly impact on a firm’s performance gives us an additional argument for our conclusion. As Russian exporting companies do not have enough resources (on average) allowing them to outperform their local counterparts, they need additional resources as they mainly operate in very traditional and low-tech industries. Damijan et al. (2013), Du et al. (2012), and Lin et al. (2014) for Chinese listed companies obtained similar results, whereas Filatotchev et al. (2008) and Golikova and Kuznetsov (2016) confirmed the opposite hypothesis. In line with Fedorova et al. (2015), we can conclude that there are some additional company characteristics, which a firm should have if it is to benefit from internalization.

Finally, the presence of foreign shareholders seems to have a negative direct impact on ROA, which contradicts the results of most papers on developed markets (Masso et al., 2013), yet reinforces the evidence from developing countries (Fatima, 2016) and Russia (Bessonova et al., 2003; Yudaeva et al., 2003). The joint analysis of the negative impact of FDI received by Russian firms and the positive effect of interaction terms suggests that foreign ownership acts as an enhancer of corporate performance, but only for internationally oriented firms. We agree with Cole et al. (2010), who stated that a critical level of fixed exporting costs could enable export-oriented firms to become MNE network participants.

We now address the effect of the country of origin of the largest foreign shareholder, as stated in our H2a and H2b. The results of our estimations are presented in Table VII.

First, we can confirm our H2a because the coefficient of the interaction term between the exports and technology availability variables is positive and significant. This could be evidence that Russian exporting companies with foreign capital from developed countries have the opportunity to implement more developed technologies in their firms, use them to create new competitive products, easily overcome the barriers of foreign markets and outperform firms operating with local markets. Golikova et al. (2012) stated that MNEs’ affiliates with foreign ownership have the highest level of productivity among Russian manufacturing companies. The findings are consistent with theoretical conclusions obtained by Dunning (2014): access to marketing connections and know-how of their parent companies from developed economies and the accumulated learning experience of producing for export makes foreign affiliates from developing countries better placed to tap MNEs’ affiliates than domestic firms. The results are in line with the conclusions reached by Alvarez and López (2013). Moreover, there is also evidence that industries with a large presence of foreign multinationals exhibit faster rates of technological transfer from the frontier, which is consistent with a foreign presence intensifying competition and enhancing incentives to adopt technologies (Boddin et al., 2017).

The financial development of the investment’s country of origin is partially significant in the sense that only one of the two interaction variables, namely, the interaction term between exports and bank capital, is significant. Thus, foreign shareholders provide access to financial resources from more developed banking systems, which, in turn, increase their potential margin from exporting and give them benefits in performance, confirming the evidence presented by Campa and Shaver (2002). In the same vein, Alvarez and López (2013) concluded that external finance (both equity and debt) cannot be easily obtained because of the difficulty in enforcing underlying contracts, while foreign investors make this process easier. The lack of significance regarding the interaction term between exports and market capital may be explained based on the limited free flow of Russian companies on stock exchanges. Given that funds raised from minority shareholders in capital markets are not relevant for Russian firms, foreign shareholders’ financial expertise regarding this issue is not considered as a relevant resource either. Our conclusions correlate with those reached by De Rosa (2006) and Girma et al. (2004), as well as those in the report on Russian FDI by UNCTAD (2013).

Our results validated the idea that exporting to markets that are more sophisticated improves the performance of firms, as shown by Huang et al. (2013) in the case of Taiwan companies. This evidence is quite important for Russian firms and supports calls for the state to introduce policies to facilitate an export-led growth strategy. Several authors (e.g. Artopoulos et al., 2013; Verhoogen, 2008) have noted that one key benefit of exporting from developing to developed countries is exposure to sophisticated buyers, who have a stronger preference for higher-quality products than local buyers. Moreover, exporting to developed countries involves a demand for human capital quality, whereby export companies are given additional incentives to develop their business model so that they can increase their competitiveness (Verhoogen, 2008). According to our predictions, intangible assets have a strong positive impact on ROA, validating the claims made by Malone and Rose (2006). At the same time, contrary to the findings of a recent study by Shakina et al. (2017), we found no influence of investments on the development of human resources within Russian manufacturing companies. Finally, operating in high-tech industries leads to higher levels of performance, which is a finding that more or less corroborates with evidence presented in other studies based on Russian samples (e.g. Golikova et al., 2012; Golikova and Kuznetsov, 2016). Other firm- and industry-specific issues, such as age, industry concentration and industry-based technological intensity, had no impact on performance in both models.

4.3 Robustness check

We run several robustness analyses to check the consistency of our estimates. We change the dependent variable (ROE), use different measures for exports and FDI (sustainable export and continuous and dummy variables for FDI), as well as implement another statistical method (quantile regression for panel data with endogenous variables). This technique allows for an understanding of the analyzing effect of companies with different levels of performance (Canay, 2011). With a few exceptions, the results broadly corroborate our findings.

5. Conclusion

The objective of this study was to analyze the exports-performance relation in Russian firms, with a focus on the role of foreign ownership from a resource-based perspective. We analyzed a sample of 518 public firms covering the period from 2004 to 2014 in order to test whether foreign presence with regard to equity has a positive impact on the link between export activity and company performance, as measured by ROA and ROE.

As is widely known, the resource-based view of the firm emphasizes the uniqueness of a set of resources as the source of sustained competitive advantages. Building on this idea, our underlying rationale was that FDI could enhance the positive effect of exports on the performance of the firm. In line with this approach, we found that the interaction between exports and foreign ownership increases the performance of a firm. The advantages of the relationship with foreign shareholders in this context are twofold: as a form of diversification of the sources of financial funds, aimed at limiting risk, even if this function is moderated by the risk of exporting; and as a mechanism to become part of global chains, thereby attenuating the sensitivity of the firm toward fluctuations in domestic demand.

Our results also shed some light on the most critical characteristics of the resources by identifying two features of foreign ownership that enhance the firm’s performance. The first characteristic refers to the technological advantages. We found that foreign shareholders from more technologically developed countries increase the performance of the firm. Thus, foreign ownership could be viewed as an opportunity to imitate foreign firms’ technology and thus close the potential technological gap. In turn, FDI could be a source for import substitution, which allows a firm’s competitiveness to be increased by applying the knowledge introduced by shareholders.

The second characteristic involves loosening financial constraints. Our results show that shareholders from countries with more developed financial systems (in terms of banking development) reinforce the positive effect of exports on firm performance. Consequently, these shareholders provide exporting firms with the financial support needed to alleviate possible financial constraints in domestic markets. Moreover, a foreign partner may transfer part of its “creditworthiness” to the domestic company in order to facilitate better financial conditions. In the same vein, by having more international relations, exporting firms are less tied to the domestic cycle and less subject to the financial constraints that result from strict monetary policies and recessions at home.

Our results should be of interest to academia, management and society as a whole. Although our research can be applicable to a number of countries and institutional settings, it is even more relevant for transition economies, in which a general lack of transparency, low standards when conducting business, and inadequate protection of creditor and minority shareholder rights are common characteristics.

For an academic audience, this research contributes to the literature by broadening the scope of empirical evidence for the indirect effect that FDI has on the exports-performance link for firms in emerging economies. Much of the previous research has focused on more developed countries in which resources are more available to firms, while their markets do not suffer from such severe imperfections. According to our approach, the relevant factors for firm performance in emerging markets are not only competences and technological abilities, but also resources, such as contacts and connections with influential shareholders.

For management, we suggest that one way to improve the performance of a firm is to exploit the positive link between exports and firm performance. The ability of the firm to attract FDI and foreign shareholders could result in competitive advantages and improve its financial performance. In turn, managers should look to expand the basis of foreign shareholders, which, in turn, could result in these shareholders alleviating financial constraints or bridging the technological gap.

Our results also have important implications for policymakers in transition economies, given that they support the notion that internationally diversified firms enjoy an advantage over purely domestic firms. Hence, policymakers should support FDI inflows by introducing appropriate polices and reforms. These foreign shareholders are likely to be interested in reliable corporate governance standards and a resilient institutional environment. Williams (2011) has shown that the innovation absorption capacity of Russian industrial enterprises remains low, while technology-based entrepreneurship has failed to generate significant economic impacts. Our results are consistent with those of Smith and Thomas (2017), who confirmed the prominence of FDI as a determinant in innovation outcomes within Russia. In addition, the small size of Russian capital markets and intermediaries relative to more developed countries could result in stricter financial constraints for Russian companies. By implementing policies aimed at attracting foreign investments, policymakers can alleviate the negative impact of such constraints.

To sum up, our research adds to the extant knowledge on the internationalization confirmatory evidence of the positive effect of exports on firm performance for a new institutional setting as is the case of Russia. Moreover, our research highlights the role of foreign shareholders as enhancers of this positive effect, and identifies two ways for this impact: the exploitation of technological advantages and the alleviation of financial constraints.

However, a number of limitations should also be noted. Perhaps the most important limitation concerns the measurement of the exports variable. The measure does not distinguish between different types of exports. Therefore, an extension of this research could address more precise metrics for export. This would help to answer the question as to whether there is an optimal level of internationalization. A second caveat involves the sample characteristics. The problem of selection bias may have appeared in the analysis since the exporting firms, which existed during that period, might have exhibited low or negative levels of performance. That said, analyzing the moderation effect of foreign ownership on surviving companies is of interest to us, as the possible absent data could be a consequence of missing information or the death of a company. Another extension to this analysis could involve studying the issues in relation to market-based indicators of performance, such as the market-to-book value or Tobin’s Q, and competitiveness indictors, such as productivity. Analyzing the interrelationship between foreign shareholders and other types of ownership, such as state shareholding or large institutional investors, could shed more light on the interaction between the different components of corporate governance and firms’ performance. Such issues are left to future research.

Sample distribution by sectors

Industry Extract Food Textile Wood Chemical Nonmetal Metal Machinery Electric Transport Others
Share (%) 11.2 11.0 0.9 3.3 11.2 9.4 12.4 12.6 12.3 13.9 1.7
Total 100

Sample distribution by priority export direction

Industry Developed Emerging CIS Unrecognizeda
Share (%) 23.0 35.0 7.0 35.0
Total 100

Notes: That is why 35 percent of the observations were not counted due to the equal numbers of countries where company exports. aThe estimation is based on the number of countries with the particular direction

Main descriptive statistics and test of means comparison: continious variables

Whole sample Exporters Non-exporters
Mean(SD) Q25 Q50 Q75 Mean (SD) Mean (SD) p-value
ROA 0.047 (0.103) 0.002 0.032 0.092 0.053 (0.098) 0.044 (.106) 0.005
ROE 0.075 (0.110) 0.008 0.079 0.193 0.076 (0.107) 0.007 (0.113) 0.093
Foreign ownership 0.427 (3.269) 0.000 0.000 0.000 0.462 (3.220) 0.406 (3.330) 0.054
Intangible assets 0.007 (0.041) 0.000 0.000 0.001 0.008 (0.045) .006 (.038) 0.039
Cost of employee 1.611 (1.516) 0.811 1.704 2.602 2.163 (1.191) 1.264 (1.594) 0.000
Size 6.577 (1.686) 5.849 6.811 7.682 7.431 (1.119) 6.066 (1.760) 0.000
Age 43.782 (45.644) 15.000 21.000 64.000 43.891 (42.397) 43.716 (47.518) 0.905
GRP per capita 243.706 (220.165) 113.000 181.200 264.479 241.410 (235.173) 245.116 (210.463) 0.634

Main descriptive statistics and test of means comparison: binary variables

Whole sample (%) Exporters (%) Domestics (%) p-value
Foreign ownership (dummy) 21.42 23.07 18.96 0.000
Operating in high-tech industries 2.92 3.44 2.14 0.006
Operating in low-tech industries 90.43 89.56 91.73 0.009
Working on high concentration 9.01 10.07 7.52 0.038
Working on low concentration 69.54 6.59 7.48 0.000

Correlation matrix

ROA ROE Exports Sustainable export Foreign ownership control Foreign ownership
ROA 1.000
ROE 0.083*** 1.000
Exports 0.043** 0.026* 1.000
Sustainable export 0.037** 0.027* 0.894*** 1.000
Foreign ownership control 0.005 0.002 0.021 0.026* 1.000
Foreign ownership 0.042** 0.001 0.077*** 0.082*** −0.017 1.000
VIF 1.03 1.02 5.85 5.54 1.05 1.09

Note: *,**,***Significant at 10, 5, and 1 percent levels, respectively

Results of basic model estimation

ROA Coef. (SE)
Exports 0.008 (0.023)
Foreign ownership −0.162** (0.084)
Exports×foreign ownership 0.104** (0.0547)
Exports direction 0.028* (0.015)
Intangible assets 0.684*** (0.183)
Cost of employees 0.006 (0.005)
Size 0.008 (0.006)
Age 0.001* (0.000)
Industry technology intensity 0.108** (0.043)
Industry concentration 0.159** (0.055)
GRP per capita −0.000 (0.000)
Centered R2 0.036
Underidentification test 360.836***
Weak identification test 154.117
Sargan test 3.742
F-stat. 2.92***
Number of observations 5,368

Note: *,**,***Significant at 10, 5, and 1 percent levels, respectively

Results of model estimation (technology and financial resources availability)

Coef. (SE)
ROA (1) (2)
Exports 0.034 (0.098) 0.078 (0.072)
Technology availability 0.044 (0.021)
Market capital −0.013 (0.026)
Bank capital 0.003 (0.028)
Exports×technology availability 0.044** (0.021)
Exports×market capital −0.017 (0.050)
Exports×bank capital 0.096* (0.052)
Exports direction 0.092 (0.058) 0.097 (0.082)
Intangible assets 1.442* (0.836) 1.467* (0.832)
Cost of employees 0.025 (0.023) 0.133 (0.042)
Size 0.001** (0.000) 0.193*** (0.045)
Age −0.008 (0.060) −0.014* (0.007)
Industry technology intensity 0.014 (0.019) 0.022 (0.057)
Industry concentration 0.070 (0.045) 0.106 (0.083)
GRP per capita 0.001 (0.000) 0.001 (0.000)
Centered R2 0.040 0.045
Underidentification test 48.742*** 64.305***
Weak identification test 37.373 61.626
Sargan statistic 1.880 1.102
F-stat 2.22** 2.44**
Number of observations 1,880 1,102

Note: *,**,***Significant at 10, 5, and 1 percent levels, respectively

List of indicators used in the study

Name of the variable Definition
Corporate performance
ROA Return on assets, %
ROE Return on equity, %
Exports Equals 1 when the firm exports in a given year, and 0 otherwise
Sustainable export Equals 1 when the firm exports in the three latest years, and 0 otherwise
Foreign ownership
Foreign ownership Equals 1 when the foreign investors own more than 25% of the shares, and 0 otherwise
Foreign ownership (dummy) Equals 1 when the firm has foreign investors, and 0 otherwise
Foreign ownership (%) % of shares owned by foreign investors
Channels of foreign investments impact
Technologies availability Equals 1 if main shareholder comes from a technologically advanced country, and 0 otherwise
Bank capital Equals 1 if main shareholder comes from a country with developed bank system, and 0 otherwise
Market capital Equals 1 if main shareholder comes from a country with developed capital markets, and 0 otherwise
Control variables
Exports direction Equals 1 when the exports are primarily directed to developed markets, 0 otherwise
Intangible assets Share of intangible assets in total assets
Cost of employees Employee costs per employee (ln)
Size Number of employees (ln)
Age Age of the company
Industry technological intensity Type of industry according to the OECD classification: low – 0, medium – 1, high-tech – 2
Industry concentration Type of industry according to Herfindahl-Hirshman Index for 4-digit classification NAICS: 1– high concentrated, 0 – medium and low concentrated industries
GRP per capita Gross regional product divided to population of the region where the head quarter of the company is situated


Table AI


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Further reading

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The authors are grateful to two anonymous referees, Professor Audra I. Mockaitis (Associate Editor), IDLab members and Philip Jaggs for their comments on previous versions. This work was supported by the Russian Science Foundation under Grant No. 15-18-20039.

Corresponding author

Anna Bykova is the corresponding author and can be contacted at: abykova@hse.ru

About the authors

Anna Bykova is PhD in Economics, an Associate Professor, and a Research Fellow at National Research University Higher School of Economics. She gives lectures on Fundamentals of Evaluation and Strategic Corporate Finance. Her field of research interests relate with corporate governance, export strategies and companies’ intangibles study.

Felix Lopez-Iturriaga is PhD in Economics, a Full Professor at the University of Valladolid, Spain and a Leading Research Fellow at the National Research University Higher School of Economics, Russia. He gives lectures in Corporate Finance, Investments and Financial Markets. He has published several books, and many papers in top-ranking international journals His main research topics are related to auditing, corporate finance, and corporate governance.