Export Intensity and Manufacturing Firm Characteristics in Kenya

Abstract

This study of examines the influence that specific firm level characteristics have on export intensity of Kenyan manufacturing firms. Three waves of panel data (2007, 2013 and 2018) from the World Bank Enterprise Survey was used focusing on 410 manufacturing firms. The aim of the study is to determine the factors influencing the growth of exports in the manufacturing sector which have been proven to be the driver of growth a country’s exports. Due to possible sample selection bias, Heckman selection model is used to preselect exporting firms which are only observable if a firm is an exporting firm. The specified model is then estimated using the 2SLS estimation technique which controls for suspected endogeneity and heterogeneity. The key findings showed a statistically significant positive relationship between export intensity and skilled human capital as well as innovation. Further, the results indicated that larger firms export more than smaller firms due to efficiency and lower cost of production required for export purposes. The study concluded that Kenya needs to rethink its exporting structure and provided policy recommendations aimed at promoting growth of exports in the manufacturing sector and eventually the growth of the country’s exports