The impact of management practices on export margins of firms: evidence from a recent Egyptian industrial survey

Abstract

Purpose

The paper aims at studying the effect of management practices on the extensive and intensive export margins of Egyptian manufacturing firms.

Design/methodology/approach

The study relies on the 2020/2021 Egyptian Industrial Firm Behavior Survey (EIFBS) which comprises 2,383 manufacturing firms representing small, medium, and large sized firms located in different regions of Egypt: Urban Governorates, Lower Egypt, and Upper Egypt. It constructs an overall management z score for each firm to estimate its effect on a firm’s probability of exporting and value of exports using Ordinary Least Squares (OLS) regressions.

Findings

Results indicate that good management is associated with a higher probability of firm exporting as well as higher export revenues conditional on exporting, robust to controlling for the level of domestic sales. These effects do not differ by firm ownership or type of sector, but rather by firm size, with managerial competence raising the probability of exporting more for large-sized firms. Additionally, good management is associated with higher firm productivity, innovation and worker training propensities which gives evidence that it is both an efficiency and a quality enhancer. Moreover, monitoring and targeting practices have significant positive effects on both margins, while incentives are only significant for the extensive margin.

Practical implications

Firms that aim at enhancing their export prospects and revenues should devote resources to review and upgrade their management systems to boost their product quality and production efficiency. Policy-wise, the government should create a competitive market environment that is open to both domestic and foreign firms’ entry to stimulate the adoption of better management practices.

Originality/value

The paper is the first to explore the link between firm management practices and export outcomes for a MENA country (Egypt). It makes use of a recent survey, the 2020/2021 Egyptian Industrial Firm Behavior Survey (EIFBS). The findings shed light on the importance of different management components (monitoring, targeting and incentives) in driving a manufacturing firm’s export performance.