International trade of african firms: explaining export participation and intensity

Abstract

International trade offers significant gains for enterprise development, particularly in terms of technology transfer, increased income and job creation. Africa's marginalization in trade suggests that companies are not reaping the full benefits associated with foreign markets. This research aims to empirically analyze the factors that explain the low participation of African firms in world trade, as well as the intensity with which participating firms trade with the rest of the world. Based on Enterprise Surveys data from the World Bank, a two-step selection model is developed. The first focusing on extensive trade margins, the second on intensive margins. The results show that size, age, the share of exporting firms in the industry, foreign capital and access to credit increase the probability of exporting. When it comes to the export effort, it is explained by a strong presence of foreign capital. On the other hand, the size and age of the company decrease with export intensity. A good understanding of the mechanisms that generate the constraints on firms' entry into external markets can guide public strategies to improve business performance on the continent and reduce its marginalization in world trade.

Code JEL : F13 ; F14 ; O55

Paper type: Empirical Research