Conclusion

This paper suggests that a range of factors should be taken into account to explain why some firms perform better than others in outward-oriented developing countries like Sri Lanka. It provides econometric evidence from a sample of 205 clothing firms in Sri Lanka on the links between firm-level export performance, foreign ownership, and technological capabilities.

Most strikingly, foreign ownership is positively associated with firm-level export shares in the clothing industry. Hence, the relatively superior exporting behavior of foreign-owned firms (due to access to the ownership advantages of their parent firms, accumulated production experience, and large firm size) is supported by econometric evidence.

The positive signs on the technology index and the human capital variables indicate that building domestic technological capability and investing in human capital also influence export shares. Thus, the results from our large sample econometric study confirm those of previous case studies and small sample econometric analysis of the Sri Lankan clothing industry. In addition, the paper highlights the influence of geography on export behavior, which has not been explored in previous studies on Sri Lanka. A firm located close to Colombo has an export advantage stemming from lower transport costs to the seaport and locational externalities.

The paper also highlights that firm size, university-educated employees affect the technological behavior of Sri Lankan clothing firms. The correct sign on the firm size variable suggests that different explanations for the firm size effect are valid. It is also likely that firm size may reflect foreign ownership. The positive sign on the university-educated workers variable suggests that higher-level skills are related to building technological capabilities. The positive sign on the R&D variable indicates that formal R&D efforts complement efforts at enhancing production capability.

More generally, the study of Sri Lankan firms shows that micro-level investigations of export performance are a fruitful undertaking as they highlight technology, skills, and other phenomena that drive the creation of competitive export advantage in developing countries (Lall, 1986, 1987, 1992). When combined with other relevant information (on a country’s investment climate, skill base, infrastructure, and science and technology institutions), such studies can be a powerful tool for formulating policies for private sector competitiveness in developing economies.

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