INNOVATION AND ICT IN EXPORTING-PRODUCTIVITY LINK AMONG MANUFACTURING AND SERVICESFIRMS IN NIGERIA

Abstract

The shares of manufacturing and services trade in Real Gross Domestic Product in Nigeria are low. The sectors, respectively averaged 10.21% and 11.61% in 1981 and 8.56% and 12.22% in 2013, while exports share (% of merchandise exports) fluctuated between 0.14% and 2.06% within the same period. These developments have led to a surge in studies on the Exporting-productivity (EXPP) link. Although extantstudies investigated EXPP link, little attention is paid to the role of innovation and Information and Communication Technology (ICT), which have the potential to improve the quality and processes of goods and services, reduce the costs of business transactions, and enhance information dissemination, thereby improving firms’ productivity. This study was, therefore, designed to investigate the role of Innovation and ICT in EXPP link among aggregate, manufacturing and services firms in Nigeria.

The Heterogeneous Firm Trade Theory provided the framework. The Standardised Structural Equation Model was employed withInnovation (measured by a new or improved product or process), ICT (measured by access to email, website ownership and internationally recognised quality certification), firm age, manager’s experience, and loan access as determinants of EXPP. Productivity was measured by input-output ratio and exporting by the percentage of sales that was directly or indirectly exported.Firm-level data were obtained from the 2014 World Bank Enterprise Survey, covering a total of 2,676 firms sampled from April 2014 to February 2015. However, 1,092 exporting firms were suitable for analyses. These firms were classified into manufacturing (529) and services (563) sectors. Estimation with Maximum Likelihood technique was done at both aggregate and sectoral levels. Root Mean Square Error of Approximation (RMSEA), Coefficient of Determination (CD), and Tucker-Lewis Index (TLI) tests were used to confirm the goodness of fit for the model at α≤0.05.

The productivity of firms at both aggregate and sectoral levels were low. Aggregate productivity of firms was 0.11, while that of manufacturing and services were 0.13 and 0.32, respectively. There was a negative EXPP link at both aggregate (-1.40%) and sectoral levels (-0.97% and -3.01% for manufacturing and services sectors, respectively). The negative coefficient of EXPP link implies absence of learning by exporting and self-selection hypothesis. This results in poor learning ability, low competitiveness, and reduced technology adoption among firms. However, both Innovation and ICT offset the negative EXPP link respectively from -1.40% to 0.82% and 0.12% for aggregate firms, -0.97% to 0.14% and 0.23% for manufacturing firms, and -3.01% to 1.01% and 0.26% for service firms. Firm age (t(26) = 4.41), manager’s experience (t(26)=3.67) and loan access (t(26) = 2.31) were the main EXPP determinants. The coefficients of RMSEA (0.06), CD (0.95), and TLI (0.92) were indicative of a good fit.

Innovation and Information and Communication Technologyhad a positive impact on exporting-productivity link for manufacturing and services firms in Nigeria. Firms need to accelerate these components in order to strengthen the exporting-productivity link. Efforts should also be made by the government to improve the technology infrastructure in the country.