Firm-product Level Research Articles

Regional Inequality of Firms’ Export Opportunity in China: Geographical Location and Economic Openness

China has a large land area and uneven regional development. There are significant disparities between the three belts (eastern, central, and western China), with the eastern region being the most developed and the western region the least developed. Considering that export is regarded as one of the troikas for China’s economic growth and firms are the basic entities engaged in trade activities, we examine whether there exists inequality of firms’ export opportunity between the three regions. We find that the critical productivity level of firms’ export in developed eastern China is significantly lower than that of western and central regions. Our results indicate that firms in eastern China are more likely to export and there is an obvious inequality of firms’ exporting opportunities.

Two worlds apart? Export demand shocks and domestic sales

This paper, using a rich dataset on Turkish firms for the 2005–2014 period, analyzes the relationship between firm-product sales in different markets to identify the channels that link exports and domestic sales. First, I use an instrumental variables strategy and establish that an exogenous 10% rise in exports increases a firm’s domestic sales by 2.6% on average. Second, I do an analogous exercise at the firm-product level, and find coefficients that are almost twice as large, hinting to the importance of product-specific scale effects. Moreover, I propose a novel approach to isolate the production versus non-production factors that influence firm dynamics by focusing on non-produced (or carry-along trade, CAT) exports. I find that CAT exports also affect domestic sales positively, suggesting that spillovers at the firm level such as the easing of liquidity constraints play a role. In the process, I reveal that export demand shocks influence firms’ expansion in terms of employment, wages, and investment. Finally, my quantification exercise indicates that export demand shocks explain about 1.4% of the annual variation in Turkish domestic sales on average. This figure, which shows heterogeneities at the sector level, rises to 4.6% during the Great Recession in 2009, when demand in Turkey’s key export partners collapsed.

Trade Liberalization, Markup and Resource Allocation

In recent years, the research on Chinese multi-product firms has aroused wide attention. As an important part of Chinese trade, data show that about 75% of the total export enterprises are multi-product firms in China, and the exports of MFNs take up more than 95% of the total export values between 2000 and 2005. Additionally, based on the product classification by BEC (Broad Economic Categories), the imports of intermediate goods account for more than 70% of Chinese total import values. Therefore, it is more in line with China’s national conditions and significant to explore the effect of intermediate trade liberalization on Chinese multi-product firms. Especially, with the rising events of de-globalization, the study on how to face the shock of intermediate liberalization by adjusting the markups of different products, and to optimize the resource allocation within enterprises and improve the competitiveness of Chinese MFNs, becomes of much greater importance for China nowadays. In this paper, based on Melitz and Ottaviano (2008), we first theoretically construct a heterogeneous firm model with the variable markup, and then estimate the firm-product level markup of Chinese manufacturing firms by modifying the augmented approach proposed by De Loecker, et al. (2016). Using highly disaggregated Chinese firm-level data from the National Bureau of Statistics of China (NBSC) and Chinese Custom data, this paper empirically uncovers the patterns of how Chinese multi-product exporters adjust the markups of their core and non-core products, during the intermediate trade liberalization. We find that core products enjoy the highest markup in a multi-product firm and the firm tends to adjust its non-core products’ markups more after the reduction of intermediate input tariff. To be more specific, the closer a product situates to the core product in the product rank ladder, the greater extent that the firm would adjust its markup to. This indicates that the intermediate input liberalization would help to narrow the gap between the core and the non-core products within the multi-product firms, and thus optimize the resource allocation. In addition, we do a series of robustness checks, which further support our aforementioned main findings. On the one hand, our research contributes to the traditional literature by examining whether and how input tariff reduction would help to adjust the markups between the core and non-core products within MFNs. On the other hand, this paper is complementary to a large body of studies on the impact of trade liberalization on market power and resource allocation. Our results suggest that China should further promote the process of trade liberalization, especially the intermediate trade liberalization, to help to optimize the resource allocation within firms. In contrast to the previous study which shows that trade liberalization can be not to the benefit of the development of weak (non-core) products (industries), we find that after the tariff reduction of intermediate goods, Chinese exporters tend to improve the markups more for the non-core products. Therefore, we suggest that one should continue to implement the product diversification strategy in the MFNs, so as to further enhance the comprehensive competitiveness of Chinese exporters and improve their ability to confront the worldwide intensive pressure by the frequent rising trade frictions, and then help to complement the strategy of building up national strength with international trade in the new era.

The relationship between firm productivity, firm size and CSR objectives for innovations

We examine how a firm’s productivity level is related to its potential corporate social responsibility (CSR) objectives for innovations, and whether this relationship is affected by firm size. Two CSR objectives for innovations are examined: a firm’s objective of reducing environmental impacts, and an objective of improving health or safety of the employees. Firm size is measured by the number of employees. A data set comprising Norwegian manufacturing firms with or without innovation activity is used. The estimation results show that the predicted probability of adopting the objective of reducing environmental impacts has a significant negative effect on the productivity level among large firms while this effect is not significant among small firms. The predicted probability of adopting the objective of improving health or safety of the employees has no significant effect on the productivity level of small or large firms. These results indicate that whether ‘it pays to be green’ or not, depends on firm size. The article offers a resource argument in order to explain the different results between small and large firms.

Time zones and German exports: first evidence from firm-product level data

This paper uses a tailor-made new data set of 3,390,871 observations for German exports to non-EU countries at the firm-product-destination level in 2011 to investigate the link between the amount of firms’ exports and the difference in time zones between Germany and the destination countries. The results indicate that including firm and product level heterogeneity is important. When distance to destination countries is controlled for, time zones only decrease exports for smaller exporters and for intermediate goods. The quantity of exports declines with increasing time difference within a firm for a given product for exports to the West (where time difference to Germany is negative) but not the East.

Process and product innovations, multi-product status and export performance: firm-level evidence from V?4 countries

Research background: In this paper, we study empirically the relationship between different forms of innovations, multi-product status and export performance of firms from four Visegrad countries. We treat innovations as the key element that can increase the level of firm productivity.
 Purpose of the article: The main objective is to analyze the empirical relationship between different firms of innovation of firms from Visegrad countries and their export performance. In contrast to previous studies that use R&D spending as a measure of innovation, we rather relay on innovation outcomes. Our detailed hypotheses postulate the existence of positive relationships between firm export performance and different forms of innovation. We seek to determine which type of innovation activity is of the greatest importance for exporting and whether it depends on firm size, the level of internationalization, the use of human capital and its sector of activity. In addition, we control for the multi-product status of firms, i.e. whether they sell one or many products.
 Methods: The measures of innovative activity of companies include both spending on R&D as well as its effects, such as product and process innovations. In addition, we control for the multi-product status measured by the share of the main product in total sales of the firm, as well as for other firm-level characteristics. The empirical implementation of the theoretical framework is based on the probit models, applied to the fifth edition of BEEPS firm level data set covering the period 2011?2014.
 Findings & Value added: Our results indicate that the probability of exporting is positively related to both product and process innovations and the multi-product status. In addition, we find that the probability of exporting is related to the set of control variables including labor productivity, firm size, the share of university graduates in productive employment, foreign capital participation and the use of foreign licenses.

Heterogeneous Firms, Factor Productivity and Trade

Melitz (2003) showed how trade liberalization induces intra-industry reallocation and enhances average industry productivity through selection effect. In his work, firm productivity plays a major role. However, uncertainty was not taken into account. Our paper will focus on firm productivity under uncertainty. From our view, firm productivity might originate mainly from factor uses and institution. Before market entry, one firm can expect own level of firm productivity by the averaged factor productivity. In addition, institutional difference can generate uncertainty of factor productivity because the factor uses are regulated in the institutions. We think that uncertainty of factor productivity can be an important determinant for the model of firm heterogeneity. Particularly, uncertainty of labor productivity can sharply differ across countries due to some inherited attributes. We will augment the work of Melitz (2003) by incorporating uncertainty of factor productivity and will show that the uncertainty determines the selection effect.

Carry-Along Trade

Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using novel linked production and export data at the firm-product level, we find that the overwhelming majority of manufacturing firms export products that they do not produce. Three quarters of the exported products and thirty percent of export value from Belgian manufacturers are in goods that are not produced by the firm, so-called Carry-Along Trade (CAT). The number of CAT products is strongly increasing in firm productivity while the number of produced products that are exported is weakly increasing in firm productivity. We propose a general model of production and sourcing at multi-product firms. While the baseline model fails to reconcile the relationships between firm productivity and the numbers of exported products observed in the data, several demand and supply-side extensions to the model are more successful. Looking at export price data, we find support for a novel theoretical extension based on demand-scope complementarities.

Firm-level determinants of direct and indirect exports: empirical evidence for C.E.E. and M.E.N.A. countries

In this paper, we study the determinants of the direct and indirect export performance of firms in Central and Eastern European (C.E.E.) and Middle Eastern and North African (M.E.N.A.) countries, both jointly and separately. In particular, we address three research questions: (i) Do the firms that export indirectly display the same characteristics as those that directly export their products?; (ii) Is the role of innovation, research and development (R&D) and human capital in export performance the same for firms that export directly and indirectly? and (iii) Is there geographical differentiation between C.E.E. and M.E.N.A. countries at the firm-level determinants of export performance? The analysis is based on a firm-level database (B.E.E.P.S. V) and covers the period between 2011 and 2014. We estimate the probability of exports, controlling for country and sector-specific effects using the probit model. We find that product innovations are more important than process innovations in determining direct export performance for the whole sample of countries. In addition, we find that the level of firm productivity, spending on R&D, human capital, foreign licences and foreign ownership are important in determining the export performance of the firms that export directly but not in the case of indirect exporters.

Two Worlds Apart? Export Demand Shocks and Domestic Sales

Traditional heterogeneous firms and trade models predict no causal relationship between firms' exports and domestic sales. This paper, using a rich dataset on Turkish firms for the 2005-14 period, analyzes the relationship between firm-product sales in different markets for the first time in the literature to identify the channels that link exports and domestic sales. First, I use an instrumental variables strategy and establish that an exogenous doubling of exports increases a firm's domestic sales by 26 percent on average -- a result that is mostly driven by small firms. Second, I do an analogous exercise at the firm-product level, and find coefficients that are 62 percent larger, hinting to the importance of product-specific scale effects. Moreover, I propose a novel approach to isolate the production versus non-production factors that influence firm dynamics by focusing on non-produced (or carry-along trade, CAT) exports. I find that CAT exports also affect domestic sales positively, suggesting that spillovers at the firm level such as the easing of liquidity constraints play a role. In the process, I reveal that export demand shocks influence firms' expansion in terms of employment, wages per employee, and investment.

Decomposing Firm-Product Appeal: How Important Is Consumer Taste?

We develop and structurally estimate a trade model in order to identify the importance of consumer taste for exporters. The model separates taste from quality and productivity (TFPQ) at the firm-product level. Export data by destination countries allow us to identify the level of taste from consumer heterogeneity across destinations. We decompose export revenue into the contribution of taste, quality and costs. We find that taste is very important and explains about 50% of the variation in export revenue. Productivity (TFPQ) differences between firm-products become more prominent than taste in explaining export success only when the cost elasticity of improving quality is high.

Labor Productivity and Basic Determinants in the Basic Metal Industry

In the study, labor productivity level of firms operating in the main metal industry and internal and external factors of labor productivity were analyzed. By considering the size of the firm and the age of the firm as internal factors and economic activity field as an external factor, both partial and cooperative effects of factors on labor productivity were investigated. One-Way and Factorial Analysis of Variances methods were applied to data obtained by the using questionnaire method. According to the analysis results, the partial effects of both internal and external factors on labor productivity have been found significant. Empirical findings also reveal that the effects of firm size on productivity differ according to the economic activity field while the productivity effect of firm age is not affected by economic activity field.

Internationalization of Colombian Firms: Competitive and Productivity as a Problem to Enter the Asian Market

The main objective of this research is to identify the influence of the productivity and competitiveness level of Colombian firms in the development of Asian market. The approach used was through descriptive and empirical analysis, with respect to measured variables, which helps the understanding of what firms require the skills of productivity. As a result of this article, a need was obtained at the corporate and governmental level, that production line should have a change to the know-how (macro), which is a necessity for international business success. The research allows to conclude aspects relevant to business activities, where the correlation of strengthening firms-government-university, is producing a negative effect, and through the psycho-entrepreneurial acquisition.

Trade policy uncertainty and exports: Evidence from China's WTO accession

This paper studies how reduction in trade policy uncertainty affects firm export decisions. Using a firm–product level dataset on Chinese exports to the United States and the European Union in the years surrounding China's WTO accession, we provide strong evidence that reduction in trade policy uncertainty simultaneously induced firm entries to and firm exits from export activity within fine product-level markets. In addition, we uncover accompanying changes in export product prices and quality that coincided with this reallocation: firms that provided higher quality products at lower prices entered the export market, while firms that had higher prices and provided lower quality products prior to the changes, exited. To explain the simultaneous export entries and exits, as well as the fact that new entrants are more productive than exiters, we provide a model of heterogeneous firms which incorporates trade policy uncertainty, tracing the effects of the changes in policy uncertainty on firm-level payoffs and the resulting selection effects.

Working Time Accounts and Turnover

Working time account is an organization tool that allows firms to smooth their demand for hours employed. Descriptive literature suggests that working time accounts are likely to reduce layoffs and inhibit increases in unemployment during recessions. In a model of optimal labour demand I show that working time account does not necessarily guarantee less layoffs at the firm level. These may be reduced or increased depending on whether the firm meets economic downturn with surplus or deficit of hours and on how productive the firm is. In expected terms, however, working time account reduces net job destruction at almost any level of firm's productivity. Model predictions are consistent with dynamics of aggregate turnover in Germany during the Great Recession.

Innovation Forms and Firm Export Performance: Empirical Evidence from ECA Countries

Objective: The main objective of this paper is to verify empirically the relationship between various forms of innovation and export performance of firms from European and Central Asian (ECA) countries. Research Design & Methods: In our empirical approach we refer to the self-selection hypothesis derived from the Melitz (2003) model which proposed the existence of a positive relationship between firm productivity and the probability of exporting. We argue that innovation activities should be regarded as a key element that can increase the level of firm productivity. We focus our analysis on four forms of innovation activities: product, process, marketing, organizational and managerial innovation. The empirical implementation of our analytical framework is based on the probit model, applied to the fifth edition of the BEEPS firm level dataset covering 2011-2014. Findings: Our empirical results indicate that the probability of exporting is positively related to both product and process innovations. The marketing and managerial innovations do not seem to affect positively export performance of firms from ECA countries. Implications & Recommendations: It is recommended to develop innovation supporting mechanisms that would target both product and process innovations rather than other forms of innovation in the ECA countries. Contribution & Value Added: The originality of this work lies in the use of the multi-country firm level dataset that allows distinguishing between various forms of innovations in the ECA countries.

Price Adjustment to Exchange Rates and Forward‐looking Exporters: Evidence from USA–China Trade

AbstractThis paper shows that the pricing behavior of exporting firms exhibits a “forward‐looking” nature with sticky prices. As a result, the expectations of future exchange rates affect current prices at both the product level and firm level. We find evidence by employing both highly disaggregated Harmonized System (HS) 10‐digit product‐level import data of the USA and firm–product level customs data on China's exports to the USA. These findings provide evidence for a previously unexplored micro‐level forward‐looking nature of trade price adjustment as response to future exchange rates, and suggest a potentially important factor in helping explain incomplete exchange rate pass‐through.

Distance-sensitivity of German exports: first evidence from firm-product level data

ABSTRACTThis article uses a tailor-made new data set of 7 580 251 observations for German exports at the firm-product-destination level to estimate a gravity equation and to investigate the link between the amount of firms’ exports and the distance to destination countries. It is shown that, in line with stylized facts based on aggregate data, the quantity of exports declines significantly with distance within a firm for a given product.

What Drives the Volatility of Firm Level Productivity in China?

The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. With the deepening of market economy, the share of the state-owned and collective enterprises declined. Expansion and contraction, as well as establishment and closure, of firms became a common phenomenon. The level and volatility of firm productivity have become increasingly important aspects of the micro performance of the economy. This paper uses a firm-level data set collected annually by the National Bureau of Statistics of China in 1998-2007 to examine the role of different firm characteristics in productivity volatility. The paper measures productivity volatility at the firm level as the standard deviation of the annual growth rate of productivity. The main objectives are twofold: first, it examines the variation of productivity volatility across firms of different characteristics and their evolution over time; second, it investigates the sources of productivity volatility at the firm level in China. The results suggest that in general, productivity volatility at the firm level has declined over time in China. Among firms with different characteristics, large firms, old firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility, one in a positive way and one in a negative way. Although the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased.

Innovation and Productivity in Irish Firms

This paper uses an endogenous switching technique which allows us to utilize micro-econometric data to construct counterfactual scenarios of the innovation-productivity relationship in Irish firms. A firm's innovation effort, capital intensity, firm size, location and its operating environment are key variables in explaining a firms' propensity to innovate. However, the importance of these factors differs across innovation types. We find mixed results on the effect of innovation on the productivity of innovators across innovation types. The results indicate in the counterfactual analysis that all types of innovation have a positive effect on the productivity levels of non-innovating firms.