The Role of Productive and Technological Capabilities on Export Dynamics in Developing Countries

Abstract

Productive and technological capabilities matter. Several strains of the literature have emphasized them as major engines of export, growth and development. But how they matter is less clear. In fact, many open questions remain on how capabilities influence export dynamics at microeconomic level. This paper empirically investigates their role on export dynamics in 40 developing countries between 2002 and 2012. In doing so, the paper exploits a country-sector-year database containing exporter-level statistical information. The empirical analysis shows that, within sectors, there is a larger number of exporters in countries with more productive capacities, and the exporters are larger and have higher prices for their products, even after controlling for level of development, size of the economy, commodity-dependency and other variables. Also, the results confirm a positive relationship between technological capabilities and diversification: within sectors, exporters in countries with more capabilities tend to export a higher number of products and to more destination markets. Furthermore, capabilities in high-technology exporters seem to play a crucial role regarding market diversification. Thus, the paper shows that, even just comparing exporters' behaviour among the developing countries, stronger productive and technological capabilities are significantly related to the "extensive" and "intensive" margin of exports, the diversification across products and destinations, and the product quality, all relevant aspects of developing countries' insertion in global trade markets. Overall, the paper underscores the role of capabilities not only on developing countries' macroeconomic resilience to trade shocks, but also on their medium-term development prospects.