Imported inputs and exporting in the Africa’s manufacturing sector

Published date21 February 2019
Pages19-30
Date21 February 2019
DOIhttps://doi.org/10.1108/WJEMSD-04-2018-0043
AuthorEdward Bbaale,Ibrahim Mike Okumu,Suzan Namirembe Kavuma
Subject MatterStrategy,Business ethics,Sustainability
Imported inputs and exporting in
the Africas manufacturing sector
Edward Bbaale
Department of Economics, Makerere University, Kampala, Uganda, and
Ibrahim Mike Okumu and Suzan Namirembe Kavuma
Department of Policy and Development Economics, School of Economics,
Makerere University, Kampala, Uganda
Abstract
Purpose The purpose of this paper is to estimate both direct and indirect channels through which imported
inputs spur exporting in the African manufacturing sector.
Design/methodology/approach The authors estimated models for all exporters, direct exporters and
indirect exporters using a probit model. The authors circumvented the endogeneity of imported inputs and
productivity in the export status models by using their lagged values. The authors employed the World Bank
Enterprise Survey data for a set of 26 African countries.
Findings From the direct channel, the authors find that importers of inputs in the previous period increase
the probability of exporting in the current period pointing to the possibility of sunk cost complementarities.
Indirectly, high lagged firm productivity spurs exporting in the current period. Being a direct importer of
inputs in the previous period increases the probability of exporting directly but has no effect on indirect
exporters. Both channels are complimentary because their interaction term is positive and significant.
Practical implications The importation of inputs seems a precondition for exporting and that any policy
obscuring imports may indirectly inhibit exportation. Government policy should make importation inputs
easier in order to stimulate exporting activities.
Originality/value The papers contribution to empirical literature is that much of the empirical studies
have overly concentrated on developed countries and hence leaving a huge knowledge gap for African
countries. The only papers focusing on Africa are by Parra and Martínez-Zarzoso (2015), who focused on the
Egyptian manufacturing sector, and Edwards et al. (2017), who used firm-level data from South Africa.
The authors extend this literature by undertaking firm-level analysis in a cross-country setting among
manufacturing firms in Africa.
Keywords Performance, International trade, Exporting, Direct and indirect channels
Paper type Research paper
1. Introduction and motivation
Exporting induces firms to adopt internationally best practices and frontier technological
innovations which induce efficiency and product quality enhancement, resulting in export
competitiveness. Such a behavior is referred to as learning-by-exporting since export
markets normally demand high-quality products that suit international consumer standards
(Bbaale, 2011; Verhoogen, 2008). The demand for high-quality exports, especially by
advanced markets, implies that firm output must result from high-quality inputs which, for
most developing countries, must be imported (Edward et al., 2017; Bas and Strauss-Kahn,
2014). This is largely because research and development which results in frontier innovation
is typically unaffordable by firms located in developing economies; therefore, technological
imitation is the second best option. It is thus largely through importation that firms in
developing economies can access frontier production inputs.
Importation of inputs enhances the export performance of firms through direct and
indirect channels (Bas and Strauss-Kahn, 2014; Bas, 2012). The direct channel relates to
importation enabling access to a variety of high-quality inputs at a lower price compared to
domestic sources (Halpern et al., 2015; Okafor et al., 2016). Bas and Strauss-Kahn (2014)
argued that the lower cost of imported inputs reduces the cost of production, thereby
enhancing a firms export price competitiveness. Additionally, high-quality imported inputs
World Journal of
Entrepreneurship, Management
and Sustainable Development
Vol. 15 No. 1, 2019
pp. 19-30
© Emerald PublishingLimited
2042-5961
DOI10.1108/WJEMSD-04-2018-0043
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2042-5961.htm
19
Africas
manufacturing
sector

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