The Mediating Role of Firm Growth and TFP Growth in Export Quality-Trade Flows Nexus Evidence from Pakistani Firms

Abstract

In today's interconnected global economy, product quality emerges as a critical determinant of international trade flows, directly aligning with the United Nations' Sustainable Development Goals (SDGs) decided to highlight worldwide inequalities (income and poverty). This study investigates the complex connection between export product quality and trade flows, specifically examining two key mediating factors: firm growth and total factor productivity growth. Using a Seemingly Unrelated Regression Model (SUR), data from non-financial firms listed on the Pakistan Stock Exchange over 21 years (1999-2020) is analyzed. The findings of this study explored that both firm growth and total factor productivity growth serve as significant mediators in the product quality-export flows, operating through both direct and indirect channels. This research contributes to understanding how firm-level factors influence the quality-trade relationship, providing insights for both policy development and corporate strategy in international trade. The results suggest that enhancing product quality, combined with firm growth and productivity improvements, can strengthen export performance and contribute to achieving sustainable development objectives.