FIRM EFFICIENCY AND THE DESTINATION OF EXPORTS: EVIDENCE FROM KENYAN PLANT‐LEVEL DATA

Abstract

Investigating the link between firm efficiency and exports in Kenyan manufacturing, the results show that exporters are more efficient than non‐exporters, and that relatively efficient firms self‐select into exporting. An important new finding is that only for export markets outside Africa must firms be efficient prior to entry. The probability of exporting to other African countries increases if production is intense in physical and human capital. For export activities outside Africa, firm size is more important. Contrary to many other studies, it is also found that export participation yields learning effects. When testing the hypothesis that the main source of learning effects is trade with developed countries (south–north), as opposed to trade with other developing countries (south–south), yet another new finding is that learning effects only obtain in south–south trade. Therefore, one can conclude that controlling for the destination of exports importantly improves the understanding of the relationship between firm efficiency and exports.

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