Human Capital, Research and Development and Exports: Firm-Level Evidence from Ghana

Abstract

Despite the vast and growing body of empirical literature focusing on the drivers of export performance of firms, the empirical evidence on the channels through which human capital and R&D affect firm export is dearth even though this relationship seems to be important, specifically for developing economies. In this study, a conceptual model is developed drawing on the Resource-Based View (RBV) theory of the firm to conduct a detailed evaluation of whether firm export is explained by R&D and human capital effects, and perhaps more importantly, whether firm innovation has a mediating role in this relationship. Export performance, innovation and R&D are measured as the propensity to export, innovate and conduct R&D by a firm respectively, whilst human capital is measured by formal training, employee schooling and employee slack time. We use a unique dataset that combines the Ghana 2013 Enterprise Survey (ES), the Ghana 2013 Innovation Follow-up Survey (IFS) and the Ghana 2013 Innovative Capability Survey (ICS). Using both simple probit and bivariate probit regression techniques, the results indicate that R&D and the components of human capital (i.e. formal training, employee slack time and employee schooling) are imperative for firm export performance in this context. Also, our findings suggest that human capital (or R&D) in the presence of innovation produces inconsequential effects on firm export. Specifically, after using a consistent estimator for the interaction effects (cross difference approach), the results reveal that the interaction terms (education and innovation, and R&D and innovation) affect export performance positively but their statistical significance differ widely by observation. Moreover, we find that manufacturing firms are more likely to participate in export activities, compared to service firms. Given, the significant roles of R&D, innovation and human capital in enhancing firm-level exports in Ghana, it is our expectation that the findings of this research would help in formulating appropriate policy lessons for firm competitiveness and inclusive growth in Ghana.