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Small Business Economics

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13-07-2019

Credit constraints and exports of SMEs in emerging and developing countries

Authors: Filomena Pietrovito, Alberto Franco Pozzolo

Published in: Small Business Economics | Issue 1/2021

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Abstract

We study the relationship between credit constraints and exports using a large and heterogeneous sample of small- and medium-sized firms from 65 emerging and developing countries between 2003 and 2014. We measure credit constraints by means of each firm’s self-assessment of whether it is credit-rationed, and we follow an instrumental variable approach that uses firm-level instruments to address the potential endogeneity of credit constraints with respect to export performance. We find robust evidence of a negative, statistically and economically significant effect of financial constraints on both the probability that a firm exports (the extensive margin) and the share of exports over total sales (the intensive margin). The impact on both margins of exports is stronger for small and young firms, and for those operating in countries where the financial system, the quality of institutions, and the overall level of economic freedom are less developed.

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Available only for authorised users

Kersten et al. (2017) provide an updated survey of this literature.

Table 1 in the online supplementary material summarizes the findings and the methodologies of the contributions that are more closely related to our analysis.

Data are accessible at http://www.enterprisesurveys.org; for simplicity, since most firm in the sample have a single establishment, we use the term firms throughout the paper, though the analysis is based on establishment data.

Data are accessible at: https://www.worldbank.org/en/publication/gfdr/data/global-financial-development-database.

Data are accessible at: https://www.heritage.org/index/explore.

Data are accessible at: http://info.worldbank.org/governance/wgi/#home.

The R² is 0.28 for the LPM and 0.25 for the probit, very similar in the two specifications. They are also relatively high values for a cross-section specification, even if we consider that we include sector, country and year fixed effects.

The (unreported) F-test for joint significance of the three variables excluded from equation (1) is 106.98, implying that they are jointly statistically significant at the 1% level.

The R² is 0.28 for the OLS and 0.23 for the tobit, very similar in the two specifications.

While we have estimated all the specifications presented above for each subsample, to economize on space in the following we will present and comment only the results obtained with our preferred specification, that is the bivariate probit model for the extensive margin and the IV-linear model for the intensive margin.

Also the other determinants of the probability that a firm is an exporter have different marginal effects for small firms and for medium firms.

Nearly all other determinants of the share of exported sales have different marginal effects for medium-small firms and for large firms.

We thank an anonymous Reviewer for suggesting to expand this part of the analysis.

Also in this case, results of the full regressions are not reported to make the table more intelligible and to economize on space, but are available upon request.

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Title: Credit constraints and exports of SMEs in emerging and developing countries
Authors: Filomena Pietrovito
Alberto Franco Pozzolo
Publication date: 13-07-2019
Publisher: Springer US
Published in: Small Business Economics / Issue 1/2021
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-019-00225-x

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