Determinants of a Firm's Level of Exports: Evidence from Manufacturing Firms in Uganda

The aim of this study was to establish why Ugandan manufacturing firms decide to enter the export market. The study built on previous studies by including business environment factors, factor intensity variables and specific firm characteristics in one integrative model to investigate the determinants of level of manufactured exports by firms using tobit and probit estimation procedures. The econometric results showed that higher levels of capital to labour ratio, firm size, Asian ownership, and being an agrobased and chemical firm are the major determinants of propensity to export. The major determinants of propensity to export to Africa region were firm size, capitala-labour ratio, skill intensity and being a chemical firm. This compares with firm size and being an agro-based firm for exporting to the Western Europe region. On the determinants of the decision to export or not, firm size, Asian ownership, capitala-labour ratio, being an agroa-based and chemical firm were the only significant variables. To promote exports, Uganda should design specific incentives to attract new firms to agro-based and chemical sectors such as tax holidays. Strategies should also be designed to grow small firms into large ones, such as loan guarantee schemes for small and medium firms, tax holidays for joint ventures and mergers, etc. In addition, the government should provide incentives for capital imports such as maintaining the current zero rating of capital imports. Finally, policy makers should also design policies aimed at attracting foreign investment such as increasing economic productivity and political confidence