Firm productivity and manufacturing exports in transition economies: An institutional and trade geography perspective

This study examines the relationship of firm productivity on export propensity and intensity for manufacturing firms in 29 transition economies across Central and Eastern Europe and the Former Soviet Union. Due to their distinct institutions and trade geography, transition economies differ significantly from both developed and developing economies, necessitating a tailored approach to analyzing firm exports. By utilizing firm-level data, we employ a two-stage estimation method to differentiate between the export entry and intensity stages while addressing sample selection issues using Heckman's two-step approaches. Importantly, we examine the moderating effects of heterogeneous home institutions and destination markets on the productivity-export nexus. Our findings indicate that productivity plays a distinct role in each export margin and underscores the varying firm behavior under diverse institutional contexts. Notably, while productivity is positively associated with firm export start, this relationship is weaker for those operating under deficient regulatory conditions than those enjoying high-quality institutional systems. Also, productivity's role diminishes concerning export intensity, highlighting similar characteristics between foreign and domestic markets. The discussion on how these outcomes provide insights for academics, policymakers, and practitioners alike is also presented.