Effects of export on the SMEs 3

The literature on the correlation between export activity and company-achievement has two streams. One emphasizes the hypothesis of ”learning by exporting”, saying that exporting results in improving indicators, competences. Positive effects of exports were proven for example by Kraay (2002), Hallward-Driemeier et al. (2002), Castellani (2002). Baldwin–Gu (2003) demonstrated the positive effects of exports on productivity based on Canadian manufacturing firms’ data. In the case of British manufacturing companies, Crespi et al. (2008) proved the effects of exports on productivity improvement. According to Yang (2008) export activity has more beneficial effects on SMEs than on large firms in China.

The other stream focuses on the hypothesis of “self-selection”, stating that those firms begin to export at all that are more productive than some others and have enough capital.

Greenaway–Kneller (2005) summarize more than thirty studies where almost all proves self-selection but only half of them proves learning by exporting. Detecting causality is difficult (see

3 Éltető-Udvari (2018) provides more detailed discussion of this topic.

the problems in Wagner 2005) and in several cases both hypotheses are true (Baldwin - Gu 2003, Girma et al. 2004, Greenaway - Yu 2004, Rehman 2016).

Regarding Central European countries Damijan et al (2005) demonstrates that effects of exports on Slovenian companies depend on the target markets. Higher productivity is characteristic for those who export to developed countries. Also for Slovenian firms, De Loecker (2013) confirms learning by exporting, manifested in productivity gains (he also finds that effect of exporting on productivity differs substantially across producer). Hagemajer - Kolasa (2008) proved self-selection based on Polish medium and large firms’ data. At the same time learning effects are also valid because the pace of productivity increase in the case of exporters is higher than in other cases. Regarding the Czech companies, Saxa (2008) examined the effects of export on the firm’s performance and emphasized the role of manager and owner in export decisions.

Vacek (2010) proves with econometric method and interviews that positive effects of exports took place only if the company exports to developed (EU) markets.

Similar are the results of Ketterer (2017) for Lithuanian firms, positive effects of exports are valid mostly for those companies who export to EU markets. Sinani - Hobdari (2008) analysed panel data of Estonian firms and shows that larger, foreign-owned, more capital-intense firms are more export-intensive. Putniņš (2013) found that Estonian exporters are larger and more productive, more innovative and pay higher wages than non-exporters. For Estonian and Latvian companies Benkovskis et al (2018) find evidence for self-selection (weakly productive firms do not enter into export) and for learning by exporting too. However, they prove that export entry results in significant productivity gains only when it is related to participation in the high-value added activities in the upstream of global value chains.

Concerning the Iberian economies, based on an econometric analysis of Portuguese firm data Pedro (2018) confirms the existence of both self-selection and learning by exporting effects on productivity. Cassiman and Golovoko (2007) examined the relationship among export, innovation and productivity for Spanish manufacturing firms. They stated that innovation and productivity motivate firms to export because innovative and productive firms can afford the entry costs of international markets. Manez-Castillejo et al. (2009) investigated also the relationship between innovation, productivity and exporting using panel data (1990-2000) on Spanish firms. Their results showed that highly productive firms self-select the international markets for exporting. Therefore, the higher the labour productivity is, the probability to introduce process innovation is higher and the greater is the firm’s probability to export.

Golovko-Valentini (2014) analysed panel data of Spanish manufacturing firms during 1990–

2002. Their results indicate that exporting is positively correlated with firm innovation output.

Larger firms show increased process innovation output after the entry into export markets, while smaller firms start product innovation before they enter the export market, with the effect of exporting lasting for about two years after the entry. Eppinger et al. (2017) concentrates on the years before and after the crisis, analysing data of Spanish companies in 2005-2012. They show that firms that entered the crisis as exporters (and continued to export

throughout the crisis years) saved more jobs, stayed more productive, and were more likely to survive. Love-Máñez (2019) uses Spanish company dataset of 1990-2013 and confirms that learning by exporting can be different according to the way of exports in time: continuous export can lead to a deep routine-based learning, while sporadic, infrequent exporters remain less persistent exporters on the long run.

3.1. Hungarian experiences

In Hungary, the survey of Szerb et al. (2013) shows that the revenues and operating profit of significant exporters are larger than that of non-exporters and small exporters. In our Hungarian survey, we divided our sample to two groups based on the criteria of export-intensity used by Szerb et al. (2013). Thus, we have a highly export intensive group, where the export/revenue ratio is above 25% (86 firms) and a low export-intensive group where this ratio is below 25% (62 firms). In our sample the average revenue of the “high” group is 1.7 times higher than that of the low exporters. 77.8% of significant exporters and 61.7% of low-exporters indicated that it is more rentable to sell abroad than in Hungary.

Opinions of our firms reinforce that there is a learning process from export activity. Almost 90%

of the companies answered that they gained more knowledge on foreign markets (Table 3).

The majority of the sample companies improved the quality of its products and introduced new production technologies.

Table 3. Changes in the company due to its export activity, in percentage of valid answers

L^OW H^IGH

KNOWLEDGE ON FOREIGN MARKETS INCREASED 80.0 96.4

PROFITS INCREASED 71.7 74.7

QUALITY OF PRODUCTS IMPROVED 43.3 72.6

NEW PRODUCTION TECHNOLOGY WAS INTRODUCED 33.3 67.9

NUMBER OF EMPLOYMENTS INCREASED 33.3 61.4

COMPANY MANAGEMENT WAS REORGANISED 26.2 49.4

Note: Low means low export-intensity, High means high export-intensity Source: own calculations

Table 3 shows important differences between the high and low export intensity groups in certain cases. Improvement of product quality, introduction of new technologies, increase of employment and company reorganisation are much more characteristic effects in the case of significant exporters, they have perceived the positive effects of exports stronger. Except profitability, all other effects have significant correlation with high-intensity exporters (based on Chi-test values).