Firm Characteristics and Export Intensity in Kenyan Manufacturing Firms: An Empirical Analysis

Kipkurui Josphat Kipsaat

doi:10.11648/j.jbed.20190401.15

Abstract

This paper examines the determinants of export intensity in Kenyan manufacturing firms. We use data from the World Bank enterprise survey 2013 and from it examine how firm characteristics explain export intensity. We use the Ordinary Least Squares estimation technique and Heckman sample selection model to estimate this relationship. The Heckman model is estimated in order to control for possible Sample Selection bias as export intensity is only observable in firms that make the decision to export. The findings show that innovation and certification are major determinants to export intensity as a unit change in these variables would result to a change in export intensity by 0.4747 units and 0.3259 respectively. Foreign firms are also found to export more as compared to domestic firms; the results show that the foreign owned firms export 0.5803 more units than domestic firms. This paper recommends that Kenyan firms should adopt internationally recognized certification standards in order for them to be more competitive in the international market and should embrace innovation by introducing new products and making improvements to their existing products; this can be achieved by investing more in research and development. These measures will increase firm export intensity leading to an overall increase in the country’s volume of exports leading to an improved balance of trade, a significant factor to overall economic growth. This paper therefore provides valuable information on how Kenyan manufacturing firms can increase the proportion of revenue received from engaging in international trade.

Highlights

Economic growth is the increase in capacity of an economy to produce goods and services over a specified time period [22]
This policy emphasizes on manufacturing with a view to sell in a foreign market, thereby by enabling domestic firms gain access to new markets in new territories and in the process expand their customer base, improve on production processes and achieve higher economies of scale leading to a growth in profits [9]
The examination of export intensity requires that we identify a set of variables that explain export behavior at firm level

Summary

Introduction

Economic growth is the increase in capacity of an economy to produce goods and services over a specified time period [22]. Economies in the pursuit of economic transformation have adopted various policies to achieve economic growth based on their resource endowments One such economic policy is import substitution which encourages local manufacturing, increases export competitiveness with a view to reduce dependence on foreign imports. Export oriented policies is another policy adopted by various economies in Sub-Saharan Africa This policy shift was motivated by the Economic success of East Asian countries dubbed the ‘Asian Tigers’. This policy emphasizes on manufacturing with a view to sell in a foreign market, thereby by enabling domestic firms gain access to new markets in new territories and in the process expand their customer base, improve on production processes and achieve higher economies of scale leading to a growth in profits [9]

Methods

Results

Conclusion