Institutions and Export Performance in 26 Transition Economies

Abstract

This chapter examines the influence of institutional conditions—formal and informal—as well as firm age, firm size, and other characteristics on country-level export performance in 26 transition economies. A two-step empirical strategy first identifies clusters of explanatory variables and, second, applies GLS panel estimations to test for the influence of explanatory and control variables on export performance. Results show that quality of formal institutions does not directly influence export performance, but that problematic informal institutions actually improve export performance. This could be because unfavorable home country conditions could motivate firms to seek outside markets. Surprisingly, findings also show average firm size does not explain export performance. Finally, overall younger firm age is found to improve exports but to a threshold, after which export performance suffers as average firm age rises.