The value added generated by export activities in Austria amounts to around 30% of GDP. On average, slightly more than two thirds of firms in the manufacturing industry are internationally active. These export activities are designed for the long term. Larger companies are significantly more active internationally and contribute the largest share of exports. Exporting companies are larger on average, generate more surpluses and invest more compared to companies that do not export. They also pay higher wages, but rather than being driven by the export activities as such, they result from the higher firm-level productivity. Finally, there is a close and reciprocal link between exports, R&D activities and productivity.
Austria’s prosperity depends to a large extent on exports, which account for more than half of the country’s economic output. If the imports necessary for the production of exports are deducted, around a third of domestic value added still comes from exports (see Figure 1).
Despite the export industry’s great importance to Austria, little was previously known about the characteristics of exporting companies. How large is the proportion of Austrian companies that export? Are they primarily large or small companies? Are exporters more productive and more successful?
Access to microdata via Statistics Austria’s Austria Micro Data Center (AMDC) makes it possible to provide detailed answers to these questions for the first time (Stehrer et al. 2022; Stehrer, 2023).
How many companies export? And how much?
Not all companies export. On average, in the 2013-2020 period, the share of Austrian manufacturing companies active in foreign trade was around 70%. Just over 55% were both exporters and importers. Around 6% were pure exporters, and just under 10% were only internationally active as pure importers. The remaining 28% were neither exporters nor importers (see Figure 2). [1]
The export activities of Austrian companies are designed for the long term. Around 90-95% of exporting companies in a given year also export in the following year, and only 1-2% of all companies cease their export activities each year. A further 5% of companies in any given year leave the market due to insolvency or closure.
Conversely, only a few non-exporting companies (around 5% per year) start exporting. As a result, the proportion of exporters among all companies is slowly but steadily increasing (see Figure 2). While 33% of companies were still not internationally active in 2013, this proportion had fallen to around 26% by 2020. Even the economic crisis and the disruption to supply chains triggered by COVID-19 were unable to halt this trend.
Non-exporters also have a higher probability (roughly 5-10%) of exiting the market. On average, around 5% of companies (as a percentage of existing companies) enter the market each year. Of these, the proportion of companies that export immediately accounts for around two thirds of all market entrants.
Smaller companies export significantly less often than large companies. While exporters are in the minority among companies with fewer than 10 employees, around half of companies with 10 to 49 employees export. In addition, more than 80% of companies with more than 49 employees are exporters, and it is very rare for large companies (meaning those with 250 or more employees) to not be exporters (see Figure 3).
Although Germany is the most important export market for Austrian companies, this does not mean that Austrian exporters limit themselves to this market. The proportion of ‘marginal exporters’ (i.e. companies that only export to one country) is only 15% of exporting companies. If marginal exporters are defined somewhat more strictly as companies that only export one product to a specific country, their share drops to only around 7%. The shares of marginal importers are only half as high according to these two definitions, at 7% and 3.5%, respectively. Unsurprisingly, these shares are significantly higher among smaller companies.
Overall, a small number of companies account for a large proportion of export sales. Around two thirds of exports are accounted for by 5% of exporting companies, 75% by around 10% of exporting companies, and 90% by a quarter of exporting companies. The situation is similar for imports, as only 25% of importing companies are responsible for 90% of all imports. If a distinction is made according to the different sizes (i.e. employee numbers) of companies, this concentration is somewhat lower, but still very pronounced.
From an economic policy perspective, this concentration is a clear sign of the success of some Austrian companies on international markets. However, it also means that there is a group of companies in the Austrian economy that may be significantly more susceptible to international demand shocks or disruptions to international supply networks.
The strengths of exporting companies
Exporting companies are larger, generate more surpluses, and invest more compared to companies that do not export. In absolute terms, this ‘export premium’ is a factor of around two to three. Per hour worked, turnover, wages and operating surpluses are a factor of 1.2 to 1.6 higher for exporters. However, taking into account both the size and productivity of the exporting companies and the socioeconomic characteristics (e.g. education, age and gender) of their employees, it is clear that export activity only has a very small positive effect on employees’ wages and salaries, which means that the productivity and performance of the companies are more important factors.
These correlations are also evident in relation to their import activity. Companies belonging to an international group of companies are also very often larger and more productive than companies that are only domestically active. This pattern is consistent with both the empirical results for other countries and the current theoretical literature on the performance of heterogeneous companies. Companies that only export to one country or only export one product (i.e. are ‘marginal exporters’) also tend to be larger and more productive than companies without export activities, albeit to a lesser extent than companies with a diversified export portfolio.
One explanation for the positive export premium is the reciprocal, close link between exports and productivity, as exporters are more productive than non-exporters, and higher productivity in the past goes hand in hand with significantly higher export intensity. Exporters also conduct R&D more frequently and invest in digitalization more often than non-exporters. In fact, there are hardly any companies active in R&D that do not export, and the more they invest in R&D, the higher the export share of turnover. In addition, the causality between exports and R&D runs in both directions. In other words, exports create incentives to develop new products, just as R&D creates the basis for products that can be marketed internationally.
Conclusion
Exports are of crucial importance to Austria’s prosperity. New data shows that export activities are very widespread in Austrian manufacturing, as half of companies with 10 or more employees export. However, only 5% of exporting companies account for two thirds of export sales.
Exporting companies are larger and economically more successful; sales, wages and operating surpluses per hour worked are significantly higher for exporters than for companies that do not export. The decisive factor here is the higher productivity of exporting companies: the more productive a company is, the better it can hold its own on export markets. Conversely, international competition forces exporting companies to continuously boost their productivity.
In terms of economic policy, this means that measures to promote the productivity of companies lead to better export performance and, conversely, that measures to promote export activities may lead to better company performance. In particular, the close relationship between R&D and exports is very important in terms of economic policy, as it shows a way to increase export intensity by promoting R&D and innovation.
If, as in the past, it is possible to increase the number of companies conducting R&D in Austria, the proportion of exporters will also continue to rise. The same applies to the correlation between productivity and exports: measures that increase productivity, such as research funding, should also increase the export activities of Austrian companies in the long term. In the best-case scenario, exports and productivity will reinforce each other over time.
[1] These figures relate to the primary survey of the structural business statistics (SBS).
Authors:
Dr. Bernhard Dachs and Univ.-Doz. Dr. Robert Stehrer (wiiw)
Bernhard Dachs is Senior Scientist at the Innovation Systems Department of AIT Austrian Institute of Technology, Vienna. He graduated in Economics from the University of Business Administration and Economics, Vienna, and holds a doctorate in Economics from the University of Bremen. Over the past years, his research focus has been the economics of innovation and technological change, in particular the internationalisation of R&D, innovation in services, and the analysis of national and international technology policy. His work has been mostly empirical and applied. Papers based on this research has been published a number of international peer-reviewed journals.
Robert Stehrer is Scientific Director at wiiw. His expertise covers a broad area of economic research, ranging from issues of international integration, trade and technological development to labour markets and applied econometrics. His most recent work focuses on the analysis and effects of the internationalisation of production and value-added trade. Other contributions relate to the connection between digitalisation, demographics, productivity and labour markets. He studied economics at the Johannes Kepler University Linz, Austria, and sociology at the Institute for Advanced Studies (IHS) in Vienna and is lecturer of economics at the University of Vienna.
The interactive graphics were created by Alireza Sabouniha. He is research assistant at wiiw and recently completed his master’s degree in Economics at the WU (Vienna University of Economics and Business).