importance of firm specific assets (i.e. absorptive capacity) and knowledge
accumulation.6
The rest of the paper is structured as follows. In Section II, we begin with an overview
of the literature. In Section III we describe the weighted FAME dataset used for this
study and highlight some data issues. This is then followed by a discussion of the
methodological issues in estimation and our modelling strategies (Section IV) as well
as the results from our econometric modelling (Section V). The last section concludes
with some relevant implications for policymaking.
II. Exports and Productivity: Overview of the Literature
In recent years there has been a surge of interest in studying the microeconomic
evidence of international trade, leading to a rapidly growing body of literature
focusing on exporting and its impact on firms (e.g. productivity/performance
improvement), taking into account the importance of heterogeneity amongst firms.
This emphasis on firm-level evidence has been partly triggered by the availability of
quality micro data, as well as recent developments in theoretical modelling and
econometric techniques to exploit these usually more intricate micro datasets.
Research on the exporting-productivity nexus is generally empirically driven and it is
mostly found in the literature that exporting is positively associated with firm
performance. 7 Nevertheless, despite this positive linkage, there is still much
controversy about whether causality runs from exporting to productivity, the other
6 In previous work (Harris and Li, 2006), we find evidence that such assets and capabilities have a
large impact on breaking down barriers to exporting for UK establishments, with these resources
proxied by establishment (and firm) size, absorptive capacity, R&D activity, and cooperation with
overseas organisations, etc.
7 See Greenaway and Kneller (2004) for a recent survey.
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