Imported Inputs and Exporting in the Africa’s Manufacturing Sector

Abstract

Purpose – The purpose of this paper is to estimate both direct and indirect channels through which imported inputs spur exporting in the African manufacturing sector. Design/methodology/approach – The authors estimated models for all exporters, direct exporters and indirect exporters using a probit model. The authors circumvented the endogeneity of imported inputs and productivity in the export status models by using their lagged values. The authors employed the World Bank Enterprise Survey data for a set of 26 African countries. Findings – From the direct channel, the authors find that importers of inputs in the previous period increase the probability of exporting in the current period pointing to the possibility of sunk cost complementarities. Indirectly, high lagged firm productivity spurs exporting in the current period. Being a direct importer of inputs in the previous period increases the probability of exporting directly but has no effect on indirect exporters. Both channels are complimentary because their interaction term is positive and significant. Practical implications – The importation of inputs seems a precondition for exporting and that any policy obscuring imports may indirectly inhibit exportation. Government policy should make importation inputs easier in order to stimulate exporting activities. Originality/value – The paper’s contribution to empirical literature is that much of the empirical studies have overly concentrated on developed countries and hence leaving a huge knowledge gap for African countries. The only papers focusing on Africa are by Parra and Martínez-Zarzoso (2015), who focused on the Egyptian manufacturing sector, and Edwards et al. (2017), who used firm-level data from South Africa. The authors extend this literature by undertaking firm-level analysis in a cross-country setting among manufacturing firms in Africa.