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Abstract: Purpose This study examines whether Free Zone
incentives effectively reflect value creation at the firm level. It
investigates the existence of a performance gap between export activity,
foreign exchange generation, and profitability, thereby questioning the
alignment between policy incentives and economic outcomes.
Design/Methodology/Approach The study adopts a quantitative
panel-data design using firm-level observations from Free Zone and non-Free
Zone firms over multiple years. Fixed-effects regression models with robust
standard errors are employed to estimate the relationships between incentive
status, export performance, foreign exchange proxies, and profitability.
Interaction and nonlinear specifications are incorporated to capture hidden
dynamics.
Findings The results indicate that Free Zone
incentives do not exert a statistically significant effect on export
performance, foreign exchange generation, or firm profitability. Export
activity is strongly associated with foreign exchange generation but does not
translate into profitability, revealing a structural performance gap and
misalignment between incentives and economic value.
Originality/Value This study contributes by introducing an
integrated accounting-based framework that links policy incentives to
behavioral, measurement, and economic outcomes. It provides novel empirical evidence
on incentive–performance misalignment in Free Zone regimes.
Theoretical, Practical, and Social Implications
The findings challenge conventional
policy assumptions and highlight the need for performance-based incentive
structures. The study offers implications for policymakers, regulators, and
firms by emphasizing the importance of aligning incentives with measurable
value creation to enhance economic efficiency and resource allocation. DOI: https://doi.org/10.51505/IJEBMR.2026.10907 |
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