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Does international openness affect the productivity of local firms?

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  • Jože P. Damijan
  • José de Sousa
  • Olivier Lamotte

Abstract

This paper examines how international openness can change firm productivity in south-eastern Europe (SEE), a crucial question for middle-income countries. Using firm-level data for six transition economies over the 1995-2002 period, we identify whether foreign ownership and propensity to trade with more advanced countries can bring about higher learning effects. We find that: (i) foreign ownership has helped restructure and enhance the productivity of local firms in four out of six countries; (ii) exporting to advanced markets has a larger impact on productivity growth in four countries, especially when the firm's absorptive capacity is taken into account; (iii) in contrast, exporting to the less competitive markets of the former Yugoslavia seems to negatively affect productivity growth in three countries; and (iv) learning effects from importing are similar to those from exporting. Our results suggest that trade liberalization is not uniformly beneficial. Regional composition of trade flows and absorptive capacity of local firms matter. Thus, trade liberalization within the SEE region may not provide a substitute for a general trade liberalization which includes access to the more competitive markets of countries belonging to the Organization for Economic Co-operation and Development. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.

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  • Jože P. Damijan & José de Sousa & Olivier Lamotte, 2009. "Does international openness affect the productivity of local firms?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 559-586, July.
  • Handle: RePEc:bla:etrans:v:17:y:2009:i:3:p:559-586
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    Cited by:

    1. Bessonova, Eugenia, 2010. "Efficiency of Manufacturing in Russia: Effect of Domestic Competition and FDI," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 17(1), pages 106-127.
    2. Emanuele Forlani, 2017. "Irish Firms’ Productivity and Imported Inputs," Manchester School, University of Manchester, vol. 85(6), pages 710-743, December.
    3. Joze Damijan & José de Sousa & Olivier Lamotte, 2010. "Trade Liberalization in Southeastern Europe," Chapters,in: Global Exchange and Poverty, chapter 4 Edward Elgar Publishing.
    4. Vincenzo Verardi & Joachim Wagner, 2012. "Productivity Premia for German Manufacturing Firms Exporting to the Euro-Area and Beyond: First Evidence from Robust Fixed Effects Estimations," The World Economy, Wiley Blackwell, vol. 35(6), pages 694-712, June.
    5. Martijn Boermans & Hein Roelfsema, 2015. "The Effects of Internationalization on Innovation: Firm-Level Evidence for Transition Economies," Open Economies Review, Springer, vol. 26(2), pages 333-350, April.
    6. Liliana Meza González, 2016. "Internacionalización y creación de nuevos productos y procesos en la industria manufacturera mexicana," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 31(2), pages 235-263.
    7. David Aristei & Davide Castellani & Chiara Franco, 2013. "Firms’ exporting and importing activities: is there a two-way relationship?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 55-84, March.
    8. repec:kap:jinten:v:15:y:2017:i:4:d:10.1007_s10843-017-0205-4 is not listed on IDEAS

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