Leonardo Iacovone

MULTI-PRODUCT EXPORTERS: PRODUCT CHURNING, UNCERTAINTY AND EXPORT DISCOVERIES*

Recent research on international trade focuses on firm-product-level heterogeneity and the role of uncertainty in shaping international trade. This article contributes to the literature by examining product-level dynamics within firms in the context of Mexican trade integration under NAFTA. The data show intense product churning within firms and confirm the existence of within-firm product heterogeneity. The data indicate that new exporters enter foreign markets with a small number of varieties, most of which were previously sold at home, and with a small export small volume. The data also suggest that export discoveries are relatively rare and are imitated within a short period of time.

Teaching Personal Initiative Beats Traditional Training in Boosting Small Business in West Africa

Helping people and their businesses grow Many lower-income people in developing countries do not receive a wage but instead are self-employed in small firms of fewer than five workers. Helping entrepreneurs to grow small businesses by teaching them formal business skills has yielded mixed results. Campos et al. show that teaching entrepreneurial skills to the self-employed works much better in terms of increasing both sales and profits. The entrepreneurial training relies on psychological mechanisms that enhance personal initiative. Science, this issue p. 1287 Introducing psychology-based training into the very smallest businesses in developing countries allows them to prosper. Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries by teaching basic financial and marketing practices, yet the impacts of such programs are mixed. We tested whether a psychology-based personal initiative training approach, which teaches a proactive mindset and focuses on entrepreneurial behaviors, could have more success. A randomized controlled trial in Togo assigned microenterprise owners to a control group (n = 500), a leading business training program (n = 500), or a personal initiative training program (n = 500). Four follow-up surveys tracked outcomes for firms over 2 years and showed that personal initiative training increased firm profits by 30%, compared with a statistically insignificant 11% for traditional training. The training is cost-effective, paying for itself within 1 year.

Stunted growth : why don't African firms create more jobs ?

Many countries in Africa suffer high rates of underemployment or low rates of productive employment; many also anticipate large numbers of people to enter the workforce in the near future. This paper asks the question: Are African firms creating fewer jobs than those located elsewhere? And, if so, why? One reason may be that weak business environments slow the growth of firms and distort the allocation of resources away from better-performing firms, hence reducing their potential for job creation. The paper uses data from 41,000 firms across 119 countries to examine the drivers of firm growth, with a special focus on African firms. African firms, at any age, tend to be 20-24 percent smaller than firms in other regions of the world. The poor business environment, driven by limited access to finance, and the lack of availability of electricity, land, and unskilled labor have some value in explaining this difference. Foreign ownership, the export status of the firm, and the size of the market are also significant determinants of firm size. However, even after controlling for the business environment and for characteristics of firms and markets, about 60 percent of the size gap between African and non-African firms remains unexplained.

ICT use, competitive pressures and firm performance in Mexico

This paper presents a set of stylized facts on the relation between information and communications technology (ICT) use, firm performance, and competition. Taking advantage of a novel firm-level data set on information and communications technology for Mexico, the study finds that firms facing higher competition appear to have more incentives to increase their use of information and communications technology. Accordingly, although there is indeed a positive relation between information and communications technology use and firm performance, this effect is greater for firms that face higher competition pressures, which is consistent with the theoretical predictions of the trade-induced technical change hypothesis.

Competition makes IT better : evidence on when firms use it more effectively

This paper uses a unique firm-level data set for Mexico, with information never used for research before, to assess how use of information technology (IT henceforth) influences firm performance. Further, the paper explores if, in the context of increasing competition from China, this effect is different for firms more strongly affected by competition where incentives for upgrading and innovation may be more intense. In this perspective, the paper analyzes the complementarity between IT and other changes spurred by competition, taking advantage of the exogenous shock generated by Chinese competition. The results indicate that IT use has higher effects over productivity in the case of firms facing higher competition from China, in the domestic market and in the U.S. market. Furthermore, the paper shows how these changes appear to be driven by complementary investments in innovation and organizational changes.