Exporting and Productivity: Learning from Vietnam

For Africa to industrialise and develop, it must learn from successful cases of structural transformation. Just two decades ago, Vietnam had a level of per capita income and structural characteristics similar to many African economies. In the meantime, Vietnam has with great success taken a very different policy stance than typical in Africa. This is especially so in promoting export-oriented industry. If learning by exporting is a key driver of progress, then a fundamental reason for Africa's lack of transformation is likely to be the low policy priority given to export promotion in the past. To enlarge the body of empirical evidence, we use an extensive 2005–2012 firm-level panel data set from Vietnam and separate out productivity effects of exporting due to self-selection. This allows us to conclude that firms actually learn by exporting. We also examine how this learning takes place. Our findings suggest that productivity gains are associated with moving to larger scale for foreign-owned firms with little evidence of subsequent learning on export markets. We find strong evidence to suggest that private domestic firms learn and accumulate knowledge from export markets with learning attributed in some part to within-firm innovations, in particular research and development. These mechanisms are highly relevant to African countries where market size, innovation and research are seriously constrained.