Browsing by Author "Chekwoti, Caiphas"

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    Investment exports and firm performance in the face of product market competition: the case of Uganda’s manufacturing
    (University of Dar es Salaam, 2008) Chekwoti, Caiphas
    A noteworthy recent development in the liberalized trade era is the increasing product market competition on manufactured products from developing counties following the wave of extensive economic reforms undertaken. How firms respond to this stiff competition is still an under explored aspect of manufacturing in particularly for developing countries such as Uganda. This is critically important in the face of significant supply side constraints such unreliable and costly electricity that generate significant exogenous costs to the firm. This study examines the response of manufacturing firms to increased product market competition in terms of their investment in equipment and machinery, exporting, employment and sales growth performance for the case of Ugandan manufacturing firms using firm level data. The study utilized both qualitative and quantitative analytical methods. Based on the firm level data, competitive pressure is associated with a higher likelihood of equipment investment but lower investment rates. Underlying this behavior are exogenous transaction costs to the firm in form of inadequate electricity supply. However, contrary to the expectation that exporting provides an alternative market option as competition increases in the domestic market, firms export intensity is negatively associated with increased product competition. Similarly to the investment behavior, evidence of the negative effect of power outages may explain this outcome. Regarding the intensity of import competition, our data reveals that increased import intensity is associated with a reduction in employment and output growth of manufacturing firms. Still this outcome is observed to be partly explained by the negative effect of high transaction costs, particularly arising from inadequate and unreliable electricity supply. Key policy implication arising from the study is that the ability of manufacturing firms to cope with increased product market competition is significantly compromised if exogenous costs such as unreliable and inadequate electricity are dominant. In the Ugandan case, the urgency of ensuring reliable and adequate electricity is paramount.