Export Premia and Sub-Contracting Discount. Passive Strategies and performance in Domestic and Foreign Markets

Tiziano Razzolini (tiziano.razzolini@unisi.it) and Davide Vannoni

No 237, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: This paper contributes to the literature on firms’ productivity and exporting decisions by analysing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. A very simple model is presented where the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only. These predictions are tested using a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. using sub-contracting in foreign markets)display lower TFP values as compared to direct exporters. Moreover, only the latter category exhibits higher pre-entry productivity levels and growth rates as well as higher post-entry TFP growth rates. Such findings are consistent with both the self-selection hypothesis and the learning by exporting explanation.

Keywords: Export Premia; Sub-contracting Discount; Total Factor Productivity; Firm Heterogeneity (search for similar items in EconPapers)
JEL-codes: D21 F13 F14 (search for similar items in EconPapers)
Pages: 28
Date: 2008-01-07
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:237

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