Firm size and export performance: Some empirical evidence

Staff research paper

This paper by Owen Gabbitas and Paul Gretton was released on 23 April 2003. The paper uses firm-level data to provide information about the relationship between firm size, domestic sales and export performance for a sample of Australian manufacturing firms.

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Key points
Media release
Contents

Global and Australian exports have increased greatly over the last two decades. The range of products exported has also increased markedly, particularly in manufactured goods and services.

The growth and changing composition of exports has focused attention on the relationship between firm size, the size of firms' domestic base and export performance.

This study uses firm-level data from the Australian Business Longitudinal Survey (1994-95 to 1997-98) to form some tentative observations about these links.

On average, firm size and the magnitude of domestic sales were not found to be major influences on exporting by manufacturers once account was taken of other factors, although many significant exporters also happen to be larger firms.

While confined to a sample of manufacturing firms, this study does not support the proposition that to succeed internationally a firm will typically need to first secure a large domestic-sales base.

This study suggests that the main influences on export performance of Australian manufacturing firms are likely to lie with a range of 'firm-specific' factors. These potentially include the kind of activity, product design and quality, marketing expertise and the motivation of management.

Further research would be needed to clarify the linkages between 'size', other firm characteristics and exporting.

Background information

Paul Gretton (Assistant Commissioner) 02 6240 3252

Firm size and the magnitude of domestic sales are generally not major influences on the export performance of manufacturers once account is taken of other factors, according to research by Productivity Commission staff.

The staff research paper uses firm-level data to provide information about the relationship between firm size, domestic sales and export performance for a sample of Australian manufacturing firms.

The paper's findings do not support the proposition that to succeed internationally a firm will typically need first to secure a large domestic-sales base.

The paper suggests that the main influences on export performance are likely to involve a range of other 'firm-specific' factors, including kind of activity, product design and quality, marketing expertise and the motivation of management.

Media requests

02 6240 3330 / media@pc.gov.au

Preliminaries
Cover, Copyright, Contents, Acknowledgements, Abbreviations and explanations

Summary
Key points, Summary

1 Introduction

2 Trends in exports
2.1 Global trends
2.2 Australian trends
2.3 Exporting by Australian firms
2.4 Summing up

3 Selected empirical studies
3.1 Main findings
3.2 Possible non-linear relationships between firm size and exporting
3.3 Summing up

4 Size in the domestic market, firm size and export performance
4.1 Export participation
4.2 Extent of export involvement
4.3 The relative importance of firm size
4.4 Summing up

A Firm-level data source
A.1 Business Longitudinal Survey

B Variables from the Business Longitudinal Survey
B.1 Variables used in regression analyses
B.2 Additional analysis

C Model outline and detailed results
C.1 Binary choice analysis
C.2 Panel data analysis
Technical annex 1 Binary choice (logistic) regressions
Technical Annex 2 Panel data regressions

References