Barriers to Internationalisation: Firm-Level Evidence from South Africa

The internal resource barriers that firms experience influence their capability to export. This in turn influences the export performance of the country and the extent to which exports contribute to economic growth. The aim of this paper is to analyse the impact of resource barriers, more specifically firm size, productivity, firm-specific capital and labour market constraints, on South African firms' decision to internationalise. The literature on South African exporting firms presents some interesting glimpses of the exporting behaviour of firms in South Africa. However, these were cross-sectional studies focusing on earlier NES data and the 2003 ICA data. This paper tries to provide another dimension in terms of data, by taking the 2007 ICA data into account and by constructing a unique panel from the World Bank Enterprise Survey data for 2003 and 2007. Using panel data allows for better understanding of South African firms in that it enables one to consider the dynamic nature of firms over time. Also, the earlier South African contributions examined the export behaviour of South African firms, but did not control for unobserved heterogeneity. This paper takes the analysis a step further by estimating a panel data two-step Heckman selection model of the predictors of firms’ export propensities and intensities. From the overall results of the model, it is clear that the unobserved factors that make export more likely tend to be associated with lower levels of exports. The main findings are that firm size, productivity and finance matter for exports. Also, barriers to doing business, such as electricity, customs delays and transportation and the use of imported inputs influence exporting firms’ supply-side capabilities.