Irish Enterprise Exporting Patterns in Goods and Services

Transcription

1 Irish Enterprise Exporting Patterns in Goods and Services Martina Lawless, Iulia Siedschlag and Zuzanna Studnicka 4 th April Research funded by Enterprise Ireland and the Department of Jobs, Enterprise and Innovation

2 Introduction Two reports: Expanding and Diversifying the Manufactured Exports of Irish-Owned Enterprises Services Exports and Exporters of Services Parts of research programme on Exports, Innovation and Productivity Funded by Enterprise Ireland and the Department of Jobs, Enterprise and Innovation Exports of both manufactured products and services are a major driver of Irish economic growth of the 1990s and 2000s. Dominant role played by multinationals (close to ninety percent of total manufactured exports).

3 Expanding and Diversifying the Manufactured Exports of Irish-Owned Enterprises

4 Introduction We investigate how firms launch, adapt, diversify and grow their exports. We disentangle between growth coming from: Entering new market destinations, Launching new products, Growing existing markets and/or products, Combinations of all of these elements. Insight into the opportunities, risks and challenges of operating on the global marketplace. Focus on domestically owned exporters.

5 Research questions How concentrated are Irish-owned manufacturing enterprises currently in terms of products and destination markets? How flexible are they in moving from declining to expanding destination markets? How dynamic are they in changing export products? Is the current concentration in products and destinations with future growth opportunities? What mix of export growth strategies do successful manufacturing enterprises use and what are the sequences of steps in their successful export growth? Do existing (long-standing) exporters have different exporting strategies compared to new exporters?

6 Data sources We merge two key sources of manufacturing firm activity: 1. Trade data (IntraStat and ExtraStat) Highly detailed transaction level records Very finely defined products (HS 6-digit level) Firm values of exported products to each destination market Limitation does not cover firms exporting values below 635,000 This excludes many firms but not much total trade 2. Census of Industrial Production Firm information on characteristics such as employment, ownership etc.

7 Data sources Between 1,000 and 1,400 firms per year. 20-year horizon ( ). 47 per cent of firms, 99 per cent of total trade. We distinguish between: Irish and foreign-owned companies, Small, medium and large companies, Firms exporting: food products, non-food products, both. Firm size distribution and average employment % Irish Non-Irish Small Medium Large All firms Irish Non-Irish All Food Both Non-food

8 Most exporters sell a few products... Distribution of Products Average number of products exported by an Irish owned firm in 2015 was 8.1. Median of 4 in Half of Irish-owned firms export fewer than five products. Foreign firms average of 19 products, median of 11. Non-food firms more diversified than food firms, but firms exporting both had highest product counts.

9 ...To a small number of markets Distribution of Markets Exporters sell into an average of 7.7 destinations (2015). Median of 3 markets. Foreign owned firms sell to on average 17.7 destinations and median of 12. Non-food firms sell to slightly more markets (average of 6.9) compared to food firms (4.2). Firms selling food and nonfood have highest market coverage (average 14.7).

10 Joint Product & Destination Dimensions Distribution of Firms by Product and Market Irish Firms Number of Products Total 1 Market Markets Markets Markets Markets Markets Total

11 Joint Product & Destination Dimensions Export value by product and market Irish firms Number of Products Total 1 Market Markets Markets Markets Markets Markets Total

12 Importance of food 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Food and non-food exports by Irish firms Irish Non-Food Irish Food

13 Top food products HS-6 % Share of product in total Irish Food Exports % Irish Market Share in Product World Exports % Growth of Irish Export Sales Product name (-) 3.8 Bovine Meat Boneless: Processed & Other (+) 23.0 Other Cheese: Cheddar Cheese, Colby (-) 3.2 Butter (-) -0.2 Meat, Offal Meat, Blood of Bovine Animals (Prepared or Preserved) (-) -8.9 Edible Offal of Bovine Animals, Fresh or Chilled of Bovine Animals, Frozen (-) -1.5 Dog or Cat Food, Put up for Retail Sale (+) 6.1 Carcasses and Half-carcasses, Veal, Other (-) Other Food Preparations of Malt Extract, Flour, Starch, Milk, Cream (-) 5.7 Bovine animals Boneless, Processed (+) 16.1 Meat of Swine (Frozen) Processed & Other Total 50 Top exported food products by Irish firms

14 Top non-food products Top exported non-food products by Irish firms HS-6 % Share of product in total Irish Non-Food Exports % Irish Market Share in Product World Exports % Growth of Irish Export Sales Product name (-) -2.1 Casein (+) Other Medicaments (Put up in Packings for Retail Sale) (+) 53.3 Other Self-Propelled Trucks (+) Burglar or Fire Alarms and Similar Apparatus (-) new Television Cameras (-) Preparations for Oral or Dental Hygiene (+) 34.6 Polyurethanes (+) 11.7 Coniferous (-) Dentifrices (+) 24.4 Hydraulic Power Engines and Motors, Linear Acting Total 26

15 Top non-food products Top exported products by foreign firms Product name (HS-6) % Average share Medicaments containing hormones, packaged Heterocyclic compounds Vaccines for human medicine Nucleic or other heterocyclic compounds Compounds containing an unfused pyridine ring Other hormones and their derivatives; other steroids Sulphonamides Other heterocyclic compounds Spectacle lenses not made of glass Compounds containing a quinoline or isoquinoline ring 2.21 Total 49.52

16 Destination markets Non-Food % Share of Irish Non-Food Exports Top destination markets % Average GDP growth Food % Share of Irish Food Exports 1 United Kingdom United Kingdom US France Germany Netherlands France Germany Italy Italy Netherlands Sweden Belgium Spain Japan China Spain Belgium China Denmark Poland Nigeria Australia US Sweden Russia Canada Japan Russia Switzerland % Average GDP growth

17 Share of Irish food Irish firm exports and world demand growth Food products Bovine meat boneless Veal Sablefish World growth

18 Share of Irish non-food Irish firm exports and world demand growth Non-food products Packaged medicine Casein Fibreboard Hides 1.00 Co-polymers Cement 0.00 Milk albumin World growth

19 Key messages part 1 Most exporting firms sell a few products to a few destinations. In contrast, export values are dominated by a relatively small group of export superstars. 11% of highly globalised Irish firms (exporting more than 20 products to over 20 destinations) account for 46% of exports. Policy perspective: High levels of specialisation in the right products and markets may be a positive strategy for growth. But concentration also brings risk (importance of the UK). On-going monitoring of global trends is required to keep ahead of market developments and be ready to exploit new opportunities. Results suggest a need for on-going support to facilitate export expansion as well as entry.

20 Exporting risky lots of early exits Survival probability by firm size

21 Constant product dynamics... Firms Changing Product Mix Number of Firms Irish Non-Irish Adding Dropping 1-Year Continue Adding Dropping 1-Year Continue

22 New products can be very short-lived Product Survival Rates by Size (Percentage of Irish Firms)

23 Even for experienced exporters Product Survival by Years of Export Experience (Percentage of Irish Firms)

24 Similar dynamics for new markets Number of Firms Changing Destinations Irish Non-Irish Enters Exits 1-Year Continue Enters Exits 1-Year Continue

25 Similar dynamics for new markets Destination Survival Rates by Size (Percentage of Irish Firms)

26 Even for experienced exporters Destination Survival by Years of Export Experience (Percentage of Irish Firms)

27 Export levels mainly due to established products and destinations Regression Decomposition of Irish Firms Exports into Extensive and Intensive Margins All Exporters Share Number of products 0.178*** Average exports per product 0.822*** Number of destinations 0.153*** Average exports per destination 0.847*** Shows total exports divided into percentage contributions of extensive margins (number of products and destinations) and intensive margin (average sales) using regression analysis.

28 But growth driven by entry & exit Percentage Contributions to Export Growth (Average ) Total Growth Continuers Entry Exit Firm Changes Irish Foreign Product Changes Irish Foreign Destination Changes Irish Foreign

29 Young exporters grow particularly rapidly Percentage Contributions to Export Growth (Average ) Total Growth Continuers Entry Exit Product Changes Experience 1-5 years Experience 6-10 years Experience >10 years Destination Changes Experience 1-5 years Experience 6-10 years Experience >10 years

30 Key messages part 2 Exporting is risky. Continuing exporters are very dynamic -frequently introduce new products, drop products and enter and exit markets. Exports sales dominated by existing product-market combinations. However, growth is largely driven by entry of new firms and movement of exporters into new products and new markets. Demonstrates importance of on-going support for firms taking risks moving into new product and market areas. Support for innovation and ongoing adjustment and experimentation is a key policy takeaway for success of exporting firms

31 Services Exports and Exporters of Services

32 Introduction International trade in services has been the fastest growing component of international trade (representing 21 per cent of world trade in goods and services in 2014). Services formed approximately 40 per cent of total Irish exports in Limited level of detail available in any country on services trade flows and the activities of firms exporting services.

33 Research questions How important is Irish trade in services? What are the participation rates of services firms in exporting? How concentrated is trade in services? What are the most important sectors? Differences between exporters and non exporters?

34 Data source Firm-level data collected through the Annual Services Inquiry (ASI) to examine the participation of non-financial services firms in exporting. The ASI is based on a census of firms with 20 and more persons and a stratified random sample for firms with less than 20 persons. The latest available information from the CSO indicates that about 18,000 firms were covered by the ASI. Studied period

35 Definition of trade in services The General Agreement on Trade in Services (GATS) describes four modes through which services may be traded: Mode 1: Cross-border supply the supplier in one country delivers a service to a customer in another country remotely (e.g. via , telephone) without either supplier or customer moving location. Mode 2: Consumption abroad the customer travels to the country in which the supplier is located in order to avail of the service (e.g. tourism exports). Mode 3: Commercial presence firms supply services in another country through the presence of an affiliate in that country. Mode 4: Presence of natural persons the supplier travels to the country in which the customer is located in order to supply the service (e.g. business consultancy). CSO uses this definition excluding Mode 3

36 Exporting is rarer in services than in goods Shares of firms by year Year % Share of % Share of % Share of % Share of exporters serv. exp. goods exp. both exp

37 And dominated by foreign firms Total exports of services ( 000s) Year Total Foreign Irish % Share foreign % Share Irish ,794,603 13,132,846 3,661, ,933,875 13,970,620 1,963, ,753,887 31,528,385 3,225, ,480,595 35,944,191 2,530, ,106,117 43,545,699 3,560,

38 What do they export? Average Share of Services in Firm Exports ( ) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% All Sectors Foreign Irish Excluding retail/wholesale

39 Exports are highly concentrated Total exports by sector, all firms ( ) Nace 2 Description % Share of firms Total exports ( 000s) % Share in total exports % Share of exp. in sales Av. Exports by firm ( 000s) 58 & Publishing activities and computer programming ,342, % ,446 Wholesale trade, except of motor vehicles ,762, % , Information service activities 0.1 5,928, % , Air transport , % ,905 Scientific research and 72 development , % ,915 Total % 47 Retail trade, except of motor vehicles , %

40 But less amongst Irish firms Exports by sector: Irish Nace & 62 Description % Share of firms % Share in total exports Wholesale trade, except of motor vehicles and motorcycles Publishing activities and computer programming Air transport Scientific research and development Warehousing and support activities for transportation Legal and accounting activities Total Nace 2 Description 58 & Exports by sector: foreign % Share of firms % Share in total exports Publishing activities and computer programming Wholesale trade, except of motor vehicles and motorcycles Information service activities Architectural and engineering activities Telecommunications Total

41 Importance of online sales Summary statistics for online sales ( 000s) Year Ownership Exporter of services Foreign Irish Non-Exporter Exporter 2008 Av. % share online sales Av. online sales 10,717 1,298 1,456 18, Av. % share online sales Av. online sales 27,992 1,024 2,097 27,164 Number of firms 2, , ,627 1, Av. % share online sales Av. online sales 31,181 1,520 1,977 52, Av. % share online sales Av. online sales 24,108 1,182 1,721 37, Av. % share online sales Av. online sales 14,069 2,004 2,373 19,019

42 Exporters outperform non-exporters Export premia Employment Productivity Wages Sales Online sales Investment Exporters All 21%*** 8.6%*** 14.1%*** 8.6%*** 37.1%*** 6% Irish 26.5%*** 9.4%*** 17.4%*** 9.4%*** 48.7%*** 9.8% Foreign 6.9% % 15.1%** 9.2% 44.9%*** Exporters of services All 17.5%*** 13.1%*** 15.7%*** 13.1%*** 40%*** 6.9% Irish 24.3%*** 8.5%*** 16.6%*** 8.5%*** 29%*** 0.8% Foreign 12.5%*** 18.2%*** 9.9%*** 18.2%*** 55.4%*** 13.6%

43 Key messages The lower participation rate in exporting suggests higher obstacles to becoming an exporter exists in the services area. Some, but not all, of this can be explained by the nontradable nature of some sub-sectors. Exports of services are dominated by foreign-owned firms. Large differences in export activity and intensity between Irish and foreign firms suggests that greater international engagement by indigenous firms is not impossible.

44 Key messages In terms of the shares of exports accounted for by different sectors within services, publishing activities and computer programming dominate services exports when calculated for all firms. However, exports are less concentrated in the top few sectors amongst Irish firms. Expansion of the client base plays a much larger role in firm export growth for services firms than it does for goods exporters.