The economic crisis in Spain has strengthened the key role of the external sector as a source of demand and as a compensating factor of the sluggish in the domestic demand. In which extent is this effect observable at a firm level? Do companies with higher export shares have better deal with the crisis? This paper aims to give an answer to these questions using an extensive database of Galician companies for the period 2007-2010 and after a revision of the main academic papers about export intensity and its determinants.
Our data come from two complementary data sources provided by Zona Franca de Vigo (www.ardan.es). First, the “Encuesta Ardán de Empresa Internacionalizada” provides us with detailed information on the variables related to the foreign sector for the year 2010. Data availability forces us to work with a cross-section data for a single year. Second, the economic database “Base de datos Ardán”published annually by the same Spanish institution covers over 8,000 companies in Galicia (Spain). The annual nature of this database allows us to build the rest of the variables in terms of differences between years 2007 and 2010.
Following authors such as García and Avella (2008), Yang and Mallick (2010) or Vogel (2011), three variables were selected to capture the performance of firms: Return on assets (ROA), return on sales (ROS), and turnover figure (Facturación). In all three cases, what is observed is the variation between 2007 (the last year before the outbreak of the crisis in Spain) and 2010 (the last year available).
Six explanatory variables were finally selected: the variation of apparent labor productivity along the period 2007-2010 (ΔProductividad), the size of the firm (Tamaño), firm sector, the degree of foreign openness (Intensidad), the foreign diversification (Diversificación) and foreign direct investment (IED). According to De Loecker (2007) and Wagner (2012), the first variable can be measured as the gross value added per worker. As a referent of the company size, the number of employees is computed using the following thresholds: 10, 50, 100 y 200 workers (five groups in total).
Concerning the economic sector, the classification of our sampling companies was made according to the Spanish National Classification of Economic Activities classification (CNAE[1]) into five groups: primary sector, energy, industry, construction and services sector. Among them, the first one was used as the reference category for our analysis. Remaining sectors are represented by dummy variables in the analysis. The degree of openness to foreign markets was measured by the export intensity in 2010. This variable is calculated as the ratio of exports to total amount of company sales. In order to measure the foreign diversification, we initially tried to include separately the number of foreign customers and the number of countries that the company exported in 2010. However, in preliminary tests we found severe multicollinearity problems caused by the high linear correlation between the two and between export intensity and the number of countries. For this reason and in order to eliminate the existing problem, we have chosen to introduce both them into the model as an interaction. Therefore, the variable Diversificación is defined as the product of the foreign customers for the number of countries destiny of firm exports. Finally, the participation of companies in the capital of other companies located abroad was measured by the Foreign Direct Investment (IED), which is one of the main forms of business participation in the equity of foreign companies.
Thus, our econometric specification proposes an explanation of the response to the economic crisis as the combination of two structural factors such as company size and sector of activity, a variable that aims to bring entrepreneurial effort in competitiveness (such as the change in productivity) and, finally, a strategic factor related to the openness to foreign markets.
It is expected that companies in sectors less affected by the crisis, which have increased the productivity, the largest and the most internationalized have done better.
Our main results confirm most of these expectations but not all of them. In general larger companies and with a better performance in its apparent labor productivity have weathered the crisis better. Moreover, the export intensity of companies has significantly helped in maintaining sales figures and profitability during the recession in Spain. This matches with the idea suggested by Loncan and Nique (2010): the export intensity is associated with positive returns in terms of return of assets (ROA).
On the contrary, following the hypothesis pointed out by Grazzi (2009), results for return on sales (measured by the ROS ratio) are statistically less significant. Therefore, it cannot be concluded that there is clear evidence of an ROS ratio higher for firms with higher export intensity. These results showing differences for the ratios could suggest the need to explore the possibility that getting customers abroad requires a financial effort which could diminish the positive effects of liberalization on ROS ratio. Classification-JEL: R1 Keywords: Comercio exterior, Internacionalización, Intensidad exportadora, Foreign trade, Internationalisation, Export intensity Pages: 223-243 Volume: 2 Year: 2014 File-URL: http://www.revistaestudiosregionales.com/documentos/articulos/pdf-articulo-2446.pdf File-Format: Application/pdf Handle: RePEc:rer:articu:v:2:y:2014:p:223-243