Firm-level determinants of export performance in East African Community countries

Abstract

This study sets out to examine the firm-level determinants of export performance in the East African Community countries using World Bank Enterprise Survey data set for Uganda, Kenya and Tanzania (2013) Rwanda (2011) and Burundi (2014). The study employs the Heckman Two-stage model to explain the relationship between export performance and the firm level variables that range from firm characteristics to entrepreneurship characteristics and the business environment. In the model stage one is export propensity that is used for selection basing on whether the firm exports or not and stage two is export intensity that is used to measure export performance as the percentage of the firm’s sales that are exported. Our results from the Probit estimation in stage one indicate that firm age, firm size, foreign ownership, possession of IQC, location of a firm in the capital city, easy access to finance, formal training of the firm employees and manager’s experiences increased the firm’s participation in the export market however corruption, informal competition and tax obstacles reduce the possibility of firms participating in the export market. From stage two we establish that firm age, firm size, foreign ownership, location of a firm in the capital city and access to finance, increased the percentage of the firm’s sales exported. On the other hand, tax obstacles, corruption and competition from the informal sector firms reduced it. Our results therefore suggest that firms should acquire international quality certification, invest more in R&D, undertake extensive training of their workers, hire experienced managers, in addition government should Provide a conducive business environment to the firms engaged in exportation through reducing the tax obstacles, fighting corruption, availing cheap credit to the firms and formalization of firms in the informal sector.