Making one’s own way: jumping ahead in the capability space and exporting among Indian firms

This paper provides large scale evidence on the determinants of international competitiveness of Indian manufacturing firms, focusing in particular on the role of technology, costs and imported intermediate inputs. Our evidence suggests that innovation, in particular R&D investment, is positively related to both firms’ probability to export and firms’ export volumes. We also find that imported intermediate inputs, incorporating foreign technology is strongly associated with expanding export activities of firms. Finally, and in contrast to much of previous evidence on developed economies, we find that higher productivity or lower unit labour costs are not systematically associated with the probability to enter export markets, but they are positively related to higher export volumes. Overall our results point to the existence of a pattern of involvement in international trade for firms in developing countries that is not relying as a main driver on cost competitiveness.

The Influence of Quality and Variety of New Imports on Enterprise Innovation: Evidence from China

In this study, we introduce the concept of differentiated quality inputs with knowledge-driven specifications for research and development (R&D) under an open economy to the endogenous growth model of knowledge spillover. Using matching industry enterprise and customs data from 2001 to 2007, which is representative of micro data at the Chinese industry level, we theoretically analyze the influence of the quality and variety of imported products on Chinese enterprises’ innovation and economic growth. We find that, first, the improvement of the quality and variety of new imported products can promote enterprise innovation. Second, new imported intermediate inputs and capital goods, new imported high-technology products, and products imported from Organization for Economic Co-operation and Development (OECD) countries have stronger promoting effects on enterprise innovation. We conclude that imported products stimulate the growth of the economy through two channels: expanding the variety and increasing the quality of inputs. To verify the stability of our model, we conducted robustness tests by defining new imported products based on a base year, measuring enterprise innovation by the number of patent applications, and measuring the quality of new imported products in a new way.

Intermediate Input Imports, Domestic Input Use and Firm-level Outcomes: Evidence from Survey Data

Imported intermediate inputs, that is, parts and materials sourced from abroad and used to make products either consumed domestically or in producing exported goods are a growing force in world trade. We test for the relative effect of imported intermediate inputs and domestic inputs in promoting foreign exports and various forms of domestic sales, using firm-level survey data. Imported intermediate inputs are found to be associated with higher overall sales, foreign exports and larger sales to multinational companies domiciled in the home country. On the other hand, domestic inputs are not found to have statistically significant positive effect on any firm-level outcomes. Since exporting firms are usually more productive than domestic firms, the results point towards the salience of outsourcing inputs in supporting firm productivity and the importance of policymaking in facilitating trade in intermediate inputs across countries. JEL: F10, F12, F23

Intermediate imports and innovation performance: do family firms benefit more?

Purpose The purpose of this paper is to analyze the impact of imported intermediate inputs on innovation performance, differentiating among types of innovation output (product and process innovation) and considering both family and non-family firms in the Spanish context. Design/methodology/approach This paper uses an unbalanced panel of 1963 firms in the Spanish manufacturing sector (13,155 observations; 2006–2016) that can be identified as family or non-family firms. The authors apply a recently developed methodology (conditional mixed process model) that takes into account the possible relationships among the dependent variables to a panel bivariate probit model with robust standard errors. Findings Importing intermediate inputs is an important source of process innovation for all firms, but not of product innovations. Significant differences were found between family and non-family firms in favor of the family type. Research limitations/implications This paper breaks down the family state into two categories (belonging to a family group or not) because the database does not contain information regarding the percentage of family ownership or the number of family members in the management structure. Moreover, the research is context specific. Practical implications These results will be useful for firms that are considering the value of importing intermediate inputs as a strategy to improve their process innovations, particularly for family firms. Social implications Family firms are more successful in the utilization of imported intermediate inputs to achieve greater innovation performance. If family firms are more competent in leveraging their intermediate input imports in innovation performance, it should contribute to increasing business performance. Originality/value The research on imports takes into account the different impacts of intermediate imports depending on innovation performance (product innovation vs process innovation) and the nature of the firm (family firms vs non-family firms).

Which Sectors Drive Egypt’s Growth And Employment?

Summary According to the International Monetary Fund, Egypt’s employment elasticity of growth in the last two decades was relatively low, as previous policies focused on capital deepening rather than improving labor utilization growth rate. This paper uses input-output analysis to identify the economic activities that have high output and employment multipliers at the subsector level of manufacturing and services in Egypt, while previous multiplier research for Egypt analyzed manufacturing as an aggregate sector. The top 20 ranking subsectors in terms Fof employment multipliers include 13 services and 7 manufacturing subsectors. Except for food and accommodation services, most of the services subsectors gain their high rank from direct and induced employment, with little contribution of backward interlinkages. The picture is mixed for manufacturing. For example, most of the employment effect of food products and beverages is attributed to the interlinkage with the agriculture sector, but the direct and induced employment effects are small. The paper presents an illustrative exercise which excludes imported intermediate inputs in order to account for the possible overestimation of the multiplier effect due to imports. The employment multiplier is reduced by more than 30% in the sectors which use intermediate inputs from high import upstream sectors.

Capital Accumulation, Asset Price Dynamics and the Macroeconomy

This article develops a dependent economy model of determination of employment and asset prices that integrates the roles of relative prices, expectations and dynamics of capital accumulation. In this model, money wage is rigid which leads to persistence of unemployment. Labour and capital are used as factors of production in the traded sector while the non-traded sector uses labour and imported intermediate inputs. The article examines macroeconomic implications of selective economic reforms for asset price dynamics, growth and employment. The discussion of comparative static exercises shows that not only the effects of different policies are ambiguous but also the short-run and the long-run effects are qualitatively different. For example, tariff liberalization causes the short-run expansions of both traded and non-traded sectors but overtime it may depress the capital stock leading to contraction of both the sectors and an increase in unemployment. The broad message of this article is that the design of macroeconomic policy should not be purely based on considerations of the short-run effects of policy changes. JEL: E22, F13, F41