Energy prices and the economic performance of firms in emerging countries.

Understanding the relationship between energy price dynamics and competitiveness is key to the debate on the transition to environmental and economic sustainability. That is particularly the case in emerging economies, where sectors and firms are less mature and more fragile to external shocks. Using a panel of firms in 12 sectors and 11 high and middle-income countries over the years 2002–2013, this paper provides evidence that growing energy prices do not harm and in some cases can even strengthen economic performance. The results suggest that the size and direction of the impact of growing energy prices depends on firms' energy intensity, among other characteristics. This should be taken into account in empirical studies focusing solely on average effects. • A widespread view is that growing energy prices determine a reduction of profits and competitiveness of firms. • This study analyzes the impact of energy prices on performance indicators of firms in developing and emerging countries. • We find that rise in energy prices can trigger innovation, which may compensate the static losses of rising input costs. • The negative impact of energy price changes on performance is stronger for firms with a higher level of energy intensity. [ABSTRACT FROM AUTHOR]