Question

Research has shown that although the largest firms in the world also tend to be the world’s largest exporters, export intensity is not positively correlated with the size of a firm. Explore the reasons for this. Then pick two industries. Discuss the levels of export intensity you would expect to find in the two industries. Explain your reasoning and compare differences across the industries.  

Answer 1

Exports represent goods and services flowing out of a country, imports represent goods and services flowing into a country. With the advent of technology and the internet, international trade is growing at great speed during recent times. International trade is a vital part of development strategy and it can be an effective instrument of economic growth, employment generation poverty alleviation.

Export intensity is not positively correlated with the size of a firm since many exporters are small and medium-sized businesses. Larger firms are more likely to have the resource base necessary to develop an export strategy successfully and small firms can pursue an export strategy by employing a specific skill base. Thus, given the appropriate type of resources, a small firm can execute an export strategy as effectively as larger firms.

Textiles Industry and

Clothing Industry

Two industries with the levels of export intensity are

1) Textiles and Clothing (T&C)

2) Pharmaceuticals

1) Textiles and Clothing (T&C)

The textile exporters from industrial countries and those from developing countries merely changed shares between themselves during the 24 years. The share of industrial countries declined by almost as much (19.2%) as was the gain in the share of developing countries (18.8%). Clothing exporters13, however, exhibit significant changes, with the share of the top 13 exporters having declined by 13.8%. New entrants have come in as well as some old ones have been knocked out. Of these new entrants, most- if not all- are from developing countries, since the share of industrial countries has declined during the period, and that of developing countries has increased. The countries that are gaining share in clothing exports are the ones whose industries are integrated into one or the other advanced country through some policy-induced preferential arrangements. Mexico, the Caribbean region, East European countries, and Mediterranean countries are capturing much of the space vacated. There has been much deeper globalization in clothing than in textiles. Indeed,

2) Pharmaceuticals

The Indian Pharmaceutical Industry has acquired a noteworthy position in the global pharma sector and has been achieving significant growth in recent years. Indian pharmaceutical industry is one of the high performing knowledge-based segments of the manufacturing sector. The India pharmaceutical industry has already made a firm mark on global markets. Pharmaceuticals’ exports grew from Rs. 373.3 million in 1973-4 to Rs. 119250 million in the year 2003-04. It is one of the top 20 top exporters of bulk actives and dosage forms. Indian exports are destined to around 175 countries around the globe including highly regulated markets of the US, Europe, Japan, and Australia.