Robustness Check for the Export Spillover Model

A caveat in the model as specified in (5) is that while the export intensity of the domestic firms varies across cross section and over time, the foreign export intensity being an average varies over time but remains constant across cross-section. Hence we check the robustness of the model by testing the model into two steps as follows:

7Similar results on firm-level productivity growth are arrived by Krishna and Mitra (1998), Balakrishnan et al. (2000), Balakrishnan et al. (2006), Topalova and Khandelwal (2011). Ghose and Roy Biswas (2014) shows that improvements in manufacturing productivity, though of a different period, are largely on account of technical change.

Dexpi_t¼ l0þ l1ðAgetÞ þ l2ðsizetÞ þ l3ðrditÞ þ l4ðimprtÞ þ l5ðkitÞ þ l6ðfptrtÞ þ l7ðmkt costtÞ þ l8ðPdtivitytÞ þ l9ðCrdttÞ þ þ hit

ð6Þ whereli, i=1 to 9> 0, and

Dexpi_t dDexpi_t ¼ a0þ a1ðFORtÞ ð7Þ After controlling for all the explanatory variables in (6), estimation results of (7) as revealed in Table3show no difference. In sum, foreign export spillovers continue to remain positive and significant only for the transport equipment industry.

Significant negative spillover is observed for food and beverages. This is suggestive of robustness of the export spillover results.

5 Conclusions

Even though there can be several possible spillover channels, we investigated into direct export spillovers from MNEs to domesticfirms in India. Dynamic panel data estimation results show significant export spillovers only in the transport equipment industry. Except in case of transport equipment industry, the channels of trans-mission from MNEs do not seem to be effective. Importantly enough, there is evidence of negative spillovers from foreign firms in case food and beverage exports. Rather, the capability to cover sunk costs by domesticfirms, productivity, credit availability, local R&D and imported technology both in embodied and disembodied form turn out to be very significant in explaining exports of domestic firms. Direct export spillovers from foreign enterprises do not have that important a role to play in explaining the export performance of the domesticfirms across most sectors.

Table 3 Firm-level export spillovers: residual analysis

Chemical Machinery Food and beverage

Transport equipment

FOR 0.05

(0.54)

−0.07

(−0.39) −0.54* (−45.19) 1.41* (281.49) Sargan test Chi

Square

19.02 59.19 6.64 63.85

AR (2) z value −0.08 −1.30 1.06 −1.22

Note z values are provided in parentheses

*1 % level of significance

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