Learning-by-Exporting? Firm-Level Evidence for UK Manufacturing and Services Sectors

In summary, this study differs in both approach and outcomes to others for the UK.
Besides weighting the data to ensure its representativeness of the population of firms,
and employing a more extensive dataset (in terms of the number of firms and
industries covered), we also use a dynamic GMM systems approach to directly
estimating TFP within a production function model that attempts to control for both
sample selection and endogeneity. The main results obtained from the modelling of
self-selectivity and ‘learning-by-exporting’ confirm that the productivity differential
between exporters and non-exporters is attributable to a combination of pre-entry
productivity increase (to overcome entry barriers) in all firms, and significant post-
entry ‘learning-by-exporting’ effect in some UK industries during 1996-2004.

As to the policy implications arising from the above results, this study echoes the
general conclusions reached by the DTI that since exporting leads to higher
productivity, it is clearly beneficial for (more) firms to sell to overseas markets to
obtain both the private and public benefits from doing so (DTI, 2006). Notably, our
findings are in line with arguments that firms need an adequate knowledge-base,
organisational capacities, and complementary assets/resources (especially intangible
and human capital assets that lead to greater absorptive capacity) to overcome such
entry barriers (Kogut and Zander, 1996). This leads us to conclude that the type and
quality of firm specific assets are vital in breaking down export barriers; while the
literature points to other factors that determine internationalisation (e.g. sector,
networks, agglomerations, etc.), the results we have obtained confirm the key, central
role of resources and capabilities, which is consistent of the international
entrepreneurship literature particularly in the business/management area. From this
we argue that policy should consider how it might best increase overseas market entry
through ensuring that potential exporters have the requisite assets.

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