What factors determine a firm’s ability to export? To answer this question, Femise experts carried out a comparative study between firms located in the European Union, Israel, Turkey and those in the MENA region (Middle East, North Africa). It seems that while productivity, R & D and size are a common denominator, other criteria may underlie the ability of firms to export to MENA countries. In the North and South of the Mediterranean, impediments and accelerators tend to differ.
In studying the factors that determine the ability of firms to export, the comparative study carried out by Femise in 2016 proves to be rich. Entitled "The determinants of export performance of firms in selected MENA countries", it examines eight countries: Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia, Turkey and West Bank & Gaza.
The productivity of factors of production, and in particular the professional qualifications of employees, determine a firms’ international performance. But, in the Middle East and Maghreb, productivity plays a lesser role than in Europe.
In addition, there are other factors that come into play related to the location of the head office. "In Tunisia and Morocco, newly created companies do not export. Tunisian start-ups with foreign capital are integrated into the international production chain. Traditional firms founded before the transition remained oriented towards the domestic market, "highlighted Alfred Tovias, professor of international relations at the Hebrew University of Jerusalem and Jan Michalek, professor of economics at the University of Warsaw. In February 2016, the authors of the Femise report had presented the preliminary results of their work at the Femise annual conference in Athens (February 14th).
Western startups are export-oriented
For firms based in the MENA region, seniority, experience and know-how weigh-in on their ability to export. This is not the case for European companies however, which are able to position themselves internationally from the very first months of their creation. In recent years, Western companies have become aware of the strategic role played by demand for foreign markets, the cornerstone of their development.
Conversely, the technological level and the volume of foreign licenses acquired, are factors that influence the export capacity of European companies.
Femise also notes an inherent specificity of SMEs in the MENA region: "Indirect exporters may be less effective in terms of labour productivity, less innovative and more modest than those that export directly," the report notes.
Moreover, the more MENA firms develop a wide range of products, the more they tend to export. On the other hand, there is no correlation between the nature of private or public capital, and its propensity to export on both shores of the Mediterranean.
Femise conomists encourage authorities of the southern Mediterranean countries to invest in human capital, modernize their education systems and support firms in their research and development efforts. The Femise report also highlights the need for eastern countries to further attract foreign direct investment.
The report is available for download at the following link: