Determinants and Effects of Productivity and Profitability in the Omani Manufacturing Industry

Abstract

The aim of this thesis is to investigate the determinants of productivity and profitability, as well as their role in market survival and the decision to export in resource-based economies. This thesis extends the literature on firms’ performance, international trade, innovation, and market dynamic selection in the context of a resource based economy, using unique plant-level panel data from the Omani manufacturing industry. The quantitative analysis of this dissertation aims at explaining why some plants are more productive and profitable than others. The empirical results indicate that plants that undertake exports and innovation activities are more productive and profitable than plants that do not. The results also show that larger plants and those with foreign capital participation are more productive and profitable than smaller and domestic plants. Furthermore, the investigation into the sources of aggregate productivity growth shows that resource reallocation between surviving plants is the main driver for aggregate productivity growth in the Omani manufacturing industry. In addition, entering plants negatively impact aggregate productivity growth, as their average productivity is less than of surviving plants.
Although both productivity and profitability are found to positively impact plants’ survival, productivity is revealed as being the dominant factor for market dynamic selection in the Omani manufacturing industry. By examining the impact of productivity and profitability on plants’ decision to start and to stop exporting, our results suggest, on the one hand, that productivity has a positive impact on plants’ decision to enter the export market and on their survival rate in the international market. Furthermore, productivity of export-starters improves upon their entry to the foreign markets. On the other hand, this thesis does not find any evidence of the impact of profitability on plants exporting decisions and similarly, there is no evidence of the impact of exports on profitability. Based on the above findings, this thesis advises the government to formulate polices to promote competition in the manufacturing industry, as well as polices to encourage plants to undertake innovative steps and exporting activity.

More information

Identifiers

ORCID for Carmine Ornaghi: orcid.org/0000-0003-2704-2537

Catalogue record

Export record