Export Premia and Sub-Contracting Discount. Passive Strategies and performance in Domestic and Foreign Markets
AbstractThis 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.
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Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 237.
Date of creation: 07 Jan 2008
Date of revision:
Export Premia; Sub-contracting Discount; Total Factor Productivity; Firm Heterogeneity;
Other versions of this item:
- Tiziano Razzolini & Davide Vannoni, 2011. "Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets," The World Economy, Wiley Blackwell, vol. 34(6), pages 984-1013, 06.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
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- Valeria Gattai & Valentina Trovato, 2014. "Estimating sourcing premia with Italian regional data," Working Papers 276, University of Milano-Bicocca, Department of Economics, revised Jun 2014.
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