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Exporting and firm performance: evidence from India

Apoorva Gupta (University of Nottingham, Nottingham, UK)
Ila Patnaik (National Institute of Public Finance and Policy, New Delhi, India)
Ajay Shah (National Institute of Public Finance and Policy, New Delhi, India)

Indian Growth and Development Review

ISSN: 1753-8254

Article publication date: 13 December 2018

Issue publication date: 28 March 2019

448

Abstract

Purpose

The purpose of this paper is to investigate the direction of causality between firm productivity and export status. The correlation can arise from multiple alternative causal models, and the authors study if more productive firms export, and/or if firms learn to export, and/or if firms learn by exporting.

Design/methodology/approach

The authors investigate these relationships, harnessing the natural experiments offered by firms which transitioned into exporting, in a dataset of Indian firms from 1989 to 2015. Each firm which made the transition is matched against a control which did not. The transitions take place across many years, thus permitting a matched event study in firm outcomes.

Findings

The authors find there is self-selection of more productive firms into exporting. Firms that make the transition into exporting become bigger, but there is little evidence of learning by exporting, of improvements in productivity right after exporting commences. However, there is evidence of learning to export, that is there is improvement in productivity of export starters in comparison to their productivity a couple of years before they begin to export.

Originality/value

The strength of the paper lies in an opportunity for sound measurement: we observe firms make a transition from domestic market into exporting. The transitions take place across many years, thus permitting a matched event study in firm outcomes. Using this methodology, the authors find that firms become more productive a few years before they export, that is they learn to export. They contribute to the literature by bringing evidence of “learning to export” from a developing country.

Keywords

Acknowledgements

The authors are grateful to Sourafel Girma and Sergio Schmuckler for insightful conversations. This paper has benefited enormously from presentations in NIPFP-DEA Research conference, a seminar at University of Nottingham and ADB-AIEN conference.

Citation

Gupta, A., Patnaik, I. and Shah, A. (2019), "Exporting and firm performance: evidence from India", Indian Growth and Development Review, Vol. 12 No. 1, pp. 83-104. https://doi.org/10.1108/IGDR-04-2018-0036

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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