Determinants of Export in Boom and Bust: Evidence from the Indian Electronics Industry

Abstract

India’s exports of electronics products underwent two major phases after 2000–2001. A boom phase from 2000–2001 to 2008–2009, where growth of Indian electronic exports increased significantly, and a bust phase from 2009–2010 to 2019–2020, with drastic decline in its growth. This gives us an opportunity to estimate and compare the factors that help firms to sustain exports in different phases of export growth. Using firm-level panel data and instrumental variable Tobit (IVTobit) model, this study shows that during the boom period, firms’ spending on research and development (R&D), imported technology and raw materials explain their exports. Firms’ age and multinational enterprises (MNEs) affiliation are also important for export in this phase. In the bust period, along with firms’ age, import of technology and raw materials, domestic raw materials, size, advertisement expenses and production efficiency of firms have emerged as important factors in determining export. These finding suggests that larger firms with high technical efficiency manage to export even during the bust period. Moreover, to export during the bust period, firms need to spend on domestic raw material, import of technologies and promotion of their products rather than spending on R&D activities.

JEL Codes: F440, L6, L63, F140, L250, C240, C260