Does Export Experience Improve Firms' Productivity? Evidence from Indonesia

Abstract

Once a firm enters a foreign market, its productivity should increase thanks to the exposure to new knowledge and experience abroad. We test this hypothesis of 'learning-by-exporting' by scrutinising export experience while controlling for self-selection effect. To measure learning, previous studies rely on productivity before- and after exporting, or on previous export participation, and so do not consider the evolving experience of exporting firms. In contrast, we use 'export age' - the number of years a firm is engaged in exporting activities. Based on Indonesian firm-level data from 2000 to 2012, we find that exporter's productivity increases with export age, but the effect decreases once the firm becomes more experienced. Such effect is larger for relatively bigger firms and for those in certain industries in the footloose, capital-intensive sectors, such as motor vehicles and chemicals production. A policy implication of our study is that easier export procedure and access to information about foreign markets will be beneficial for firms, especially the new exporters.