Export guarantees and firm performance in the context of corporate governance

Abstract

Micro, small and medium enterprises (MSMEs) the forerunners of the Indian economy equipped with the greatest potential of growth and employment opportunities are the focus of this paper. By examining firm-level data for years 2007-2008 and 2017-2018, this paper captures the simultaneous expenditure on insurance premium and export earnings on the technical efficiency of firms. On applying stochastic frontier production function, results reveal that Indian MSMEs although being labour intensive have high average technical efficiency in the two comparative years. Results also indicate that factors such as firm size, age, ownership, technological imports both embodied and disembodied, expenditure on R&D, and export guarantees contribute to the technical efficiency of MSMEs. The top 25 percent of efficient MSMEs in 2017-2018 rely more on exports, have higher forex earnings with higher expenditure on marketing & advertising, and expenditure on export guarantees. This thus warrants a further improvement in technical efficiency through access to financial services, skilled labour, training of labour, enhancing and attracting foreign investment for operational collaborations, and incentives for easier and risk-free penetration in the world market