Paulo Correa

Identifying Supply-Side Constraints to Export Performance in Ecuador: An Exercise With Investment Climate Survey Data

We apply a Heckman selection model to the 2003-Investment Climate Survey (ICS) to investigate supply-side constraints to export performance at the firm level in Ecuador. To correct for the non-random truncation problem, we use the Heckman selection model to estimate the probability of exporting (export propensity) and the share of total sales that are exported (export intensity) by Ecuadorian firms. A baseline model with 12 independent variables divided into three categories – idiosyncratic characteristics, technology, and business environment – is developed. Three other models are developed with the addition of variables related to trade integration, business environment, and infrastructure. Results corroborate with the hypothesis implicit in the Heckman model, which considers both decisions made by a firm – whether to export, and how much of its sales to export – to be interdependent. In the Ecuadorian case, three important results for the firm’s export performance are found: technology matters; infrastructure does not; and trade orientation is significant, with specialized firms tending to have smaller export intensity when having the countries of the Andean Community as their main trade partners, the opposite happening if the U.S. is their main trade partner. We find a robust and stable relationship for export propensity and intensity with size, import of inputs, labor regulations, in-house R&D, quality certification, web-use, and foreign ownership. Also, capacity utilization and trade with the U.S. positively affect export intensity, while trade within the Andean Community has the opposite effect in our outcome variable. No significant relationship was found for the infrastructure variables.World Bank Policy Research Working Paper 4179, March 2007.

Obstacles to Growth for Small and Medium Enterprises in Turkey

Many studies have shown that firm growth decreases monotonically with size and age. In this study, the authors investigate employment growth of firms in Turkey with an emphasis on small and medium size enterprises. In Turkey, small and medium size enterprises account for almost 77 percent of employment and play a crucial role in the economy. However, the analysis of firm dynamics in Turkey shows that medium-size firms (51-250 workers) are the slowest growing group in the economy. Moreover, small and medium size enterprises grow at a slower rate in Turkey than in several comparator countries in the Eastern Europe and Central Asia region. After determining this irregularity, the paper analyzes how the investment climate affects firm growth and finds that improved access to finance is the most important factor that significantly increases firm growth rates.

Will the crisis affect the economic recovery in eastern European countries ? evidence from firm level data

Two sources of growth are firm learning and innovation. Using a unique panel data for 1,686 firms in six countries (Bulgaria, Hungary, Latvia, Lithuania, Romania, and Turkey), this paper applies panel data estimators and Juhn-Murphy Pierce decomposition in order to identify the effects of the global economic crisis on sales growth of innovative and young enterprises in Eastern European countries. The results show that innovative and young firms were significantly more affected by the crisis than non innovative and older enterprises. The authors interpret these results as an indication that the achievement of pre-crisis growth rates in those countries may be difficult.

Trade liberalization and ‘export response’: Whither complementary reforms?

What enables Ecuadorian manufacturing firms to start exporting? And what are the determinants of the share of total sales exported by a firm, once the decision of becoming an exporter has been made? We apply a Heckman selection model to the Ecuadors Investment Climate Survey (ICS) to investigate supply-side constraints to export performance at the firm level. We estimate export propensity (the probability of exporting) and export intensity (the share of total sales that are exported). The application of the Heckman selection model to a rich dataset as the ICS is a major contribution as previous applications of the Heckman selection model used much limited datasets, limiting the range of hypotheses to be tested. Furthermore, other studies on export performance based on ICS data use either Tobit or Probit models, incurring important methodological limitations. We find robust and stable relationships for export propensity and intensity with firm size, import of inputs, labor regulations, in-house R&D, quality certification, Web use, and foreign ownership. Capacity utilization and trade with the US positively affect export intensity, while trade within the Andean Community has the opposite effect in our outcome variable. No significant relationship was found with the infrastructure variables.

Identifying the Obstacles to High-Impact Entrepreneurship in Latin America and the Caribbean

High-impact companies are a very important source of economic and job growth. Identifying the drivers and barriers behind their development is key to developing a sound supporting policy framework. The Global Entrepreneurship and Development Index (GEDI) can interpret and measure entrepreneurial capacity as a systemic phenomenon. For that reason it provides a powerful means of assessing regional entrepreneurial performance. This paper begins by analyzing GEDI results in order to draw a picture of how well entrepreneurship systems perform in Latin America and the Caribbean. The lessons drawn from this analysis are deepened through the qualitative analysis of nine case studies on the creation and development of successful high-impact companies in the region.