Factors Affecting the Inter-Firm Variations in Export Performance: A Case of Indian Autoparts Industry
The Indian Journal of Economics, Vol. LXXIX, No. 312, pp. 45-64, July 1998
20 Pages Posted: 29 Oct 2012
Date Written: July 1998
The inter-firm differences in export performance can be attributed to a variety of factors, which may be broadly grouped into two categories viz. exogenous factors and endogenous factors. Exogenous factors are those on which the firm has either no or very little control like exchange rates, demand conditions in different markets, export-import policies, price of labor and capital inputs, tariff and non-tariff barriers, etc. On the other hand, Endogenous factors are those on which a firm can exercise its control by decision making power. These are firm specific factors like technology, product mix, size, capacity utilization, human resource development, research and development, participation in export development programs, etc. These endogenous factors play a very important role in the varied degrees of export success as they are within the reach of firm’s management. In this direction, the paper attempts to analyze and test certain endogenous variables such as size of the firm, application of technology (viz. in house R &D, number of foreign collaboration agreements, foreign equity participation), net profit/loss, average wages and salaries, expenditure on highly paid employees, export orientation/thrust, value added, the nature of product manufactured (critical components/parts), etc. in determining the firm’s export performance. Based on the data collected from 84 exporting units, the study empirically tested the determinants with a set of three multiple regression models and brings out significant results.
The paper examines determinants of export performance, as investigated in the three models in the framework of newer theories of comparative advantage such as ‘neo-technology’ and ‘neo-factor proportions’ which describe the determinants of export performance arising out from such market imperfections as the differences in technological levels, economies of scale, skills, capital utilization or intensity, product mix or differentiation, etc., and concludes that the large and medium sized units which are having an inward looking perspective, follow the different strategies of profit maximization to be derived from the large, lucrative and protective domestic market. Therefore, it is found that their higher profits (mainly from domestic market) are associated with less export performance. Similarly, their R&D activities are also in line with an inward looking orientation and therefore, to the possible extent their acquired technology has also been used for the domestic production. Their exports, however, are generally more of the capital intensive products or critical components than that produced by small units.
The small units on the contrary have different strategies for maximizing their profits. As they are unable to compete with large units in domestic markets because of their established goodwill and reputed brand names, they have switched to overseas markets with more product development and adaptation activities and earn more profits from exports. Their products, however, are generally less capital intensive and non-critical components. Both the units, small as well as large/medium size, however, according to their strategies of profit maximization, have considered the importance of skilled labor and highly paid employees in the production of quality products.
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Keywords: export performance, foreign collaboration agreements, export orientation, determinants of export performance, R&D, foreign technology and export performance
JEL Classification: F14, F21, F23, F40, L62, O32
Suggested Citation: Suggested Citation