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Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets

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  • Tiziano Razzolini
  • Davide Vannoni

Abstract

This paper contributes to the literature on firms’ productivity and exporting decisions by analysing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. A very simple model is presented where the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only. These predictions are tested using a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. using sub-contracting in foreign markets)display lower TFP values as compared to direct exporters. Moreover, only the latter category exhibits higher pre-entry productivity levels and growth rates as well as higher post-entry TFP growth rates. Such findings are consistent with both the self-selection hypothesis and the learning by exporting explanation.
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Suggested Citation

  • Tiziano Razzolini & Davide Vannoni, 2011. "Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets," The World Economy, Wiley Blackwell, vol. 34(6), pages 984-1013, June.
    • Handle: RePEc:bla:worlde:v:34:y:2011:i:6:p:984-1013
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    Cited by:

    1. Daniela Federici & Valentino Parisi, 2012. "Corporate Taxation and Exports," Working Papers 2012-01, Universita' di Cassino, Dipartimento di Economia e Giurisprudenza.
    2. Giovannetti, Giorgia & Marvasi, Enrico, 2016. "Food exporters in global value chains: Evidence from Italy," Food Policy, Elsevier, vol. 59(C), pages 110-125.
    3. Valeria Gattai & Valentina Trovato, 2014. "Estimating sourcing premia with Italian regional data," Working Papers 276, University of Milano-Bicocca, Department of Economics, revised Jun 2014.
    4. Giorgia Giovannetti & Enrico Marvasi & Marco Sanfilippo, 2015. "Supply chains and the internationalization of small firms," Small Business Economics, Springer, vol. 44(4), pages 845-865, April.
    5. Bolatto, Stefano & Grazzi, Marco & Tomasi, Chiara, 2022. "Export modes and firms’ adjustments to exchange rate movements," European Economic Review, Elsevier, vol. 141(C).
    6. Holger Breinlich & Alessandra Tucci, 2011. "Foreign market conditions and export performance: does `crowdedness' reduce exports?," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 991-1019, August.
    7. Mariarosaria Agostino & Emanuele Brancati & Anna Giunta & Domenico Scalera & Francesco Trivieri, 2020. "Firms' efficiency and global value chains: An empirical investigation on Italian industry," The World Economy, Wiley Blackwell, vol. 43(4), pages 1000-1033, April.
    8. Gattai Valeria & Trovato Valentina, 2016. "Estimating Sourcing Premia Using Italian Regional Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1029-1067, April.
    9. Co, Catherine Y. & Nguyen, Thu Kim & Nguyen, Tung Nhu & Tran, Que Nguyet, 2018. "The exporting and subcontracting decisions of Viet Nam's small- and medium-sized enterprises," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 449-466.
    10. Valeria Gattai, 2015. "Internationalisation and performance at the firm-level: what we learn from Italy," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 475-509, December.
    11. Nenci, Silvia & Fusacchia, Ilaria & Giunta, Anna & Montalbano, Pierluigi & Pietrobelli, Carlo, 2022. "Mapping global value chain participation and positioning in agriculture and food: stylised facts, empirical evidence and critical issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    12. Rafael Pardo & Ruth Rama, 2013. "Is the Pro-Network Bias Justified?," SAGE Open, , vol. 3(3), pages 21582440134, July.
    13. Anna Giunta & Domenico Scalera & Francesco Trivieri & Jeffrey B. Nugent & Mariarosaria Agostino, 2011. "Firm Productivity, Organizational Choice and Global Value Chain," Working Papers 2011R09, Orkestra - Basque Institute of Competitiveness.
    14. Bratti, Massimiliano & Felice, Giulia, 2009. "Exporting and Product Innovation at the Firm Level," MPRA Paper 18915, University Library of Munich, Germany.
    15. Davide Castellani & Giorgia Giovannetti, 2010. "Productivity and the international firm: dissecting heterogeneity," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(1), pages 25-42.
    16. Davide Castellani & Giorgia Giovannetti, 2010. "Productivity and the international firm: dissecting heterogeneity," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(1), pages 25-42.
    17. Danielle D. Van Jaarsveld & Hyunji Kwon & Ann C. Frost, 2009. "The Effects of Institutional and Organizational Characteristics on Work Force Flexibility: Evidence from Call Centers in Three Liberal Market Economies," ILR Review, Cornell University, ILR School, vol. 62(4), pages 573-601, July.
    18. Giorgia Giovannetti & Enrico Marvasi & Marco Sanfilippo, 2013. "Supply Chains and the Internalization of SMEs: Evidence from Italy," Working Papers - Economics wp2013_30.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    19. Catherine Y. Co & Thu Kim Nguyen & Tung Nhu Nguyen & Que Nguyet Tran, 2017. "The missing middle: Growing and strengthening Vietnam’s micro, small, and medium-sized enterprises," WIDER Working Paper Series 072, World Institute for Development Economic Research (UNU-WIDER).
    20. Catherine Y. Co & Thu Kim Nguyen & Tung Nhu Nguyen & Que Nguyet Tran, 2017. "The missing middle: Growing and strengthening Vietnam's micro, small, and medium-sized enterprises," WIDER Working Paper Series wp-2017-72, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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