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Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany

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Abstract

This paper investigates the links between firm survival and three types of international trade activities—exports, imports and two-way trade. It uses unique new representative data for manufacturing enterprises from Germany, one of the leading actors on the world market for goods. The paper contributes to the literature by providing the first evidence on the role of imports and two-way trading for firm survival in a highly developed country. The result indicate a strong positive link between firm survival on the one hand and imports and two-way trading on the other hand, while exporting alone does not play a role for exiting the market or not.

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Notes

  1. See Wagner (2012a) for a survey of recent empirical studies.

  2. For surveys see Greenaway and Kneller (2007) and Wagner (2007).

  3. Studies include Amiti and Konings (2007), Kasahara and Rodrigue (2007), Halpern et al. (2009) and Vogel and Wagner (2010).

  4. Studies include Andersson et al. (2008), Kasahara and Lapham (2008), Muûls and Pisu (2009), Altomonte and Békés (2009) and Castellani et al. (2010).

  5. This literature looks at the survival of exporting and non-exporting firms on the home market; studies that investigate the determinants of surviving as an exporter on the export market include Ilmakunnas and Nurmi (2010) and Wagner (2008a, 2012b).

  6. Given the data used in this study (described in Sect. 2) and the definition of exits and survivors (discussed in Sect. 3) applied here the time span of the study covers only 4 years (2001–2004). Therefore, it is not appropriate to apply methods from survival analysis (see Esteve-Pérez et al. (2008) for a study of the role of exports in determining the survival of small firms using discrete time proportional hazard models that account for unobserved individual heterogeneity).

  7. In 2001 this threshold was 16,617€ and in 2002 it was 16,620€.

  8. The merging of the data sets was done inside the research data center of the Statistical Office in Berlin-Brandenburg by Julia Höninger.

  9. The West German and the East German economy still differ largely even many years after the unification in 1990, and this is especially true for international trade (see Wagner (2008b) for an analysis). Therefore, all empirical investigations are carried out separately for both parts of Germany here.

  10. Unfortunately, other firm characteristics that might be important for both firm survival and international trade like innovation activities (see Esteve-Pérez et al. 2008) and financial variables (see Görg and Spaliara 2009) cannot be included here due to lack of information in the data.

  11. Using data from the U.S. Bernard and Jensen (2007) report that the probability of failure is lower for multiproduct plants than for single-product plants after controlling for other plant characteristics including size, age and exporter status. Braakmann and Wagner (2011a) use German firm level longitudinal data to investigate the relationship between product diversification and the stability of sales and employment. They find that contrary to portfolio theoretic considerations more diversified firms exhibit a higher variability of sales and employment. However, the effects are negligibly small from an economic point of view. Furthermore, Braakmann and Wagner (2011b) find that an increase in the degree of product diversification has a negative impact on profitability when observed and unobserved firm characteristics are controlled for. This helps to understand the fact that about 40 % of all firms are single-product firms according to a detailed classification of products (see Table 3 for the cohorts of firms investigated here), and that multi-product enterprises with a large number of goods are a rare species.

  12. Note that these empirical models are not to be considered as models that explain the exit decision of the firms. The data at hand are not rich enough for that kind of empirical investigation. The empirical models are only used to indicate the ceteris paribus difference in the exit probability of firms with different forms of international trade activities, following a standard approach used in empirical studies from the micro-econometrics of international firm activities (see Wagner 2007).

  13. Descriptive statistics for variables included in the empirical models are reported in the Online Appendix.

  14. As a robustness check computations were performed using rare events logit (see King and Zeng 2001a, b), too. All results are remarkably similar; to economize on space, the tables are available on request.

  15. See Castellani et al. (2010), Goldberg et al. (2010a, b), Bas and Strauss-Kahn (2010), Damijan et al. (2011) and Vogel and Wagner (2010).

  16. Details are not reported here to economize on space but are available from the author on request.

  17. It should be noted that the missing positive link between exports without imports and firm survival is not due to the fact that firms that only export are marginal exporters only that export only a small share of their production. In West Germany in 2001 the share of exports in total sales was 25.1 % on average for the firms that were exporters only, compared to 27.8 % for firms that were exporters and importers. Differences in the share of exports in total sales between these two groups of firms were of the same order of magnitude in the other years and in East Germany. Details are available on request.

  18. One way to extend this study is to consider the role of the share of exports in total sales and the ratio of imports to total sales for firm survival; unfortunately, this information is not available for Germany (see Sect. 2 above). Another line of extension should consider the differences between firms that exported and/or imported for several years and firms that just started to trade or just stopped to trade (see Görg and Spaliara 2009); unfortunately, the period covered by the data for Germany is not long enough for this exercise (again, see Sect. 2 above).

  19. See Wagner (2011a) for a discussion of these issues.

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Acknowledgments

I thank the German Research Foundation for financial support under project WA 610/5-1 “Firm exit” (Betriebsschließungen). Comments from participants at these presentations, from Claus Schnabel and Daniel Fackler and from two referees are gratefully acknowledged. Special thanks go to Julia Höninger and Florian Köhler for pointing out problems related to the identification of firm exits with the turnover tax statistics data; their comments lead to a complete revision of an earlier version that circulates as a working paper, see Wagner (2011b). The usual disclaimer applies.

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  1. Institute of Economics, Leuphana University Lueneburg, P.O. Box 2440, 21314, Lueneburg, Germany

    Joachim Wagner

  2. IZA, Bonn, Germany

    Joachim Wagner

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Wagner, J. Exports, imports and firm survival: first evidence for manufacturing enterprises in Germany. Rev World Econ 149, 113–130 (2013). https://doi.org/10.1007/s10290-012-0141-2

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