Exports, Firm Size, and Firm Dynamics

This study analyzes the relationship among exports, firm size, and firm dynamics by examining the open economy of Germany. In the German economic system, exports account for about one third of total sales by manufacturing firms. This study identifies causes and consequences of exports. It contributes to the existing research in three ways: 1) it presents evidence on the determinants of export performance of German firms from an econometric investigation based on a comprehensive set of micro data; 2) it tests econometrically the hypothesis that firm growth and export performance are positively related; and 3) it outlines the range of available data from German official statistics for research in small business economics. The research is based on longitudinal establishment level data (i.e., data for local production units) for some 7,000 manufacturing firms located in Lower Saxony. The panel data set covers firms which produced in at least one of the years between 1978 and 1989, and all data are annual sums or averages. Empirical models for the export/sales ratio were estimated separately for firms from each of the four broad groups of industries -- basic products, capital goods, consumer goods, and food, beverages, and tobacco products. The study used the following exogenous variables: firm size and its square, dummies for multi-establishment firms and firms from technologically advanced industries, human capital intensity, and domestic market share. The study reveals similar results for firms in all four industries. The findings confirm the initial theory that the impact of firm size is positive, but decreases with size, and that human capital intensity, domestic market share, and advanced technology all have a positive influence on the export performance of a firm. (AT)