Is Learning-by-exporting and Self-selection Market Specific? Evidence from Zimbabwean Manufacturing Firms’

Abstract

The study examined the learning-by-exporting and self-selection hypotheses with the level of development of the export destination as one of the major variable. The specific questions to be answered by this research are: Is learning-by-exporting and self-selection hypotheses market specific? Specifically, and using World Bank enterprises survey of 2016, the study investigated the extent to which differences in sunk costs across export market destinations make it more difficult or easier to penetrate some markets than others. Post-entry, the study analyzed whether learning-by-exporting that result in knowledge and technology spillover is a function of the level of development of the destination trading market. To achieve the objective of the research, the study used ordinary least squares (OLS) and maximum likelihood Probit estimators, respectively, to test the hypotheses that learning-by-exporting and self-selection are market specific. Both ordinary least squares (OLS) and Probit estimations fail to provide evidence supporting the theoretical propositions that learning-by-exporting and self-selection hypotheses vary by the level of development of a given firm’s export market. In other words, the study’s findings show that for Zimbabwean manufacturing exporters, learning-by-exporting is not market specific. That is, there is no advantageous scope for learning in a developed export market when compared to developing country export markets. At the same time, the study’s empirical estimations found that self-selection proposition is also not market specific. This implies that, for Zimbabwean manufacturing firms, the obstacles (if any) of penetrating both developed and developing export markets are the same. Thus, there is need to improve the general microeconomic environment in which firms operate will be instrumental in reducing the sunk costs of foreign market entry.