Does export performance improve firm performance? Evidence from Indonesia

‘Learning-by-exporting’ hypothesis suggests that once a firm enters a foreign market, its productivity will increase thanks to the exposure to new knowledge and experience abroad. We test this hypothesis using Indonesia’s firm level data from 2000 to 2012. The methodology involves scrutinizing the learning process of exporters by incorporating ‘export age’ – the number of years engaged in exporting activities – as an explanatory variable in the model. We find that exporter's total factor productivity increases with export age, but not linearly. Furthermore, larger exporting firms and those in particular industries undergo a clearer learning process. However, even though export experience can boost productivity, it is only applicable for firms that have high productivity from the beginning, supporting the ‘self-selection’ hypothesis.