In this work we assume that the firm’s marginal propensity to use locally produced
products (cF - mF in equation 2 above) may be proxied by the percentage of material
inputs used by the firm and produced by local firms. Furthermore, we use the
percentage of exported product as a proxy of the firm’s exporting activity. Of course,
this percentage does not render a direct approximation of ∆Xr in equation 2 above but
is an indication of the firm’s impact to the local economy that is attributed to its
exporting activity. As concerns performance we tried to avoid questions related to
financial measures and attempted to examine whether certain indicators of performance
had improved over the last five years or not. In that sense we recorded for each firm
whether employment, total sales, profit margins and investments had evolved
favourably for the firm or not. Our intention was to increase the validity of the
responses on the expense of more information that could, however, be wrong or
misleading. Again, we assume that responses to these questions may be used as proxies
to the firm’s conventional performance (employment, profit margins, investment) or
even to reveal growth trends and strategy (total sales). Furthermore we assume that the
firms performance may be proxied by a series of dummy variables revealing whether
certain dimensions of performance have shown a positive or no-change (more
infrequently a negative change), in the past five years. Again we assume that either the
firm’s percentage of product that is exported or the firm’s percentage of material inputs
produced by local firms may determine a firm’s performance. Table 1 shows definitions
and descriptive statistics of all dependent and independent variables collected through
the questionnaires.
4.3 Econometric Methods
We assume that the percentage of material inputs used by a firm and produced by local
firms (PMIR) is affected by the firm’s relation to suppliers networks and the type of
theses networks as well as a range of other factors that reveal the firm’s size, sector of
economic activity, location in a remote or a more accessible area, etc. In the same way
we assume that the percentage of a firm’s product that is exported outside the area
(PSE) is affected by the firm’s relation to customers networks and a range of enterprise
and entrepreneurial characteristics. In other words we assume that the percentage of
material inputs used by a firm and produced locally (PMIR) or the percentage of
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