Institutions and Exports of Firms: A Cross Country Analysis

Abstract

Institutional perceptions in the country influence export propensity of firms based on standard theories. This study using a sample of 11,970 firms across three countries Pakistan, India and Bangladesh investigates the relationship between institutions and export propensity of firms. The study develops a moderation model to investigate the mechanism linking institution and export. Empirical analysis makes use of three main category of variables, namely the variable of interest (export propensity), institutional variables (corruption, political instability and informal sector) and moderating variable (innovation). The results show that institutional characteristics have an effect on the export propensity of firms however these effects are not uniform across the three countries. Innovation moderates the relationship between the institutional variables and export propensity of firms, though they are not similar for the three countries and not for all institutional variables.