Determinants of Firm-level Export Performance: A Case Study of Indian Textile Garments and Apparel Industry

Drawing on international trade and industrial organisation theories, this paper identifies variable affecting (a) export decision function i.e. to export or sell in domestic market, and (b) export performance function i.e. share of exports in output. These functions are estimated for Garment and Apparel producing units in Delhi. Form of business organisation reflecting access to capital turns out to be a key determinant in both functions. Estimated marginal impact of identified variables (scale and share of sales expenses) on the probability of exporting in estimated Probit model declines sharply in making from single proprietorship to partnership and further to limited companies. On the other hand, every single determinant (scale, share of wages, share of sales expenses and technical efficiency) has found to have increasing marginal impact on export performance in estimated Tobit model in moving across the three forms of business organisation. Empirical results suggest two policy changes to boost export performance. One, given the importance of scale for exports, the existing policy of reserving garments and apparel for exclusive production in small scale units needs to be scrapped. Simultaneously, it is also necessary to amend current labour legislation applicable to large scale factory units as it introduces labour market inflexibility and hence serves as an impediment to expansion of existing units and entry of new units.