Investment climate, outward orientation and manufacturing firm productivity: New empirical evidence

Marie-Ange Véganzonès and Hoang Thanh Mai Nguyen
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Hoang Thanh Mai Nguyen: KU Leuven - Catholic University of Leuven = Katholieke Universiteit Leuven

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Abstract: Drawing on the World Bank Enterprise Surveys, we revisit the link between firm-level investment climate and productive performance for a panel of enterprises surveyed twice in time in 70 developing countries and 11 manufacturing industries. We take advantage of the time dimension available for an increasing number of countries to tackle the endogeneity issue stressed in previous studies. We also use pertinent econometric techniques to address other biases inherent in the data (e.g.measurement errors, missing observations and multicollinearity). Our results reinforce previous findings by validating, with a larger than usual sample of countries and industries, the importance of a larger set of environment variables. We show that infrastructure quality, information & communication technologies, skills and experience of the labour force, cost of and access to financing, security and political stability, competition and government relation contribute to firms' and countries' performances gap. The empirical analysis also illustrates that firms which choose an outward orientation have higher productivity level. Nevertheless, outward oriented enterprises are more sensitive to investment climate limitations. These findings have important policy implications by showing which dimensions of the business environment, in which industry, could help manufacturing firms to be more competitive in the present context of increasing globalization.

Keywords: Investment climate; outward orientation; total factor productivity; manufacturing; firm-level data (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec, nep-eff and nep-sbm
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01618733v2
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Published in Applied Economics, 2018, 50 (53), pp.5766-5794. ⟨10.1080/00036846.2018.1488065⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01618733

DOI: 10.1080/00036846.2018.1488065

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