We conduct a randomised control trial that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.
Operating profits for treatment firms increase 15-20% relative to control. These results suggest that demand-side constraints may be a critical barrier to firm growth in developing countries and can be mitigated through market access initiatives. This growth in profits is driven by substantial quality upgrading and declines in output per hour, indicating that foreign buyers demand higher quality products that take longer to manufacture. Further evidence suggests that these technical improvements were driven by learning-by-exporting.