This paper investigates whether firms that start exporting become more productive, using micro data from Slovenian manufacturing firms between 1994 and 2000. The study uses matched sampling techniques to control for self-selection into export markets and applies the Olley and Pakes (1996) framework to estimate total factor productivity (TFP), allowing for different market structures and relaxing the assumption that productivity follows an exogenous Markov process. The results show that firms that start exporting become on average 8.8 percent more productive once they begin exporting, with the productivity gap between exporters and domestic firms increasing over time, reaching 12.4 percent higher productivity growth after 4 years of exporting. These results hold at the industry level and are robust to other controls, including private ownership. Using information on the destination of exports, the study finds that productivity gains are higher for firms exporting to high-income regions. The paper also tests the learning-by-exporting hypothesis, finding that firms that start exporting experience significant productivity gains, both immediately and over time. The results suggest that exporting firms not only become more productive but also grow faster in productivity compared to non-exporting firms. The study contributes to the literature by using a unique dataset and modifying the Olley and Pakes method to account for endogeneity and sample selection. The findings support the learning-by-exporting hypothesis and highlight the importance of export activity in driving productivity growth in a transitioning economy.This paper investigates whether firms that start exporting become more productive, using micro data from Slovenian manufacturing firms between 1994 and 2000. The study uses matched sampling techniques to control for self-selection into export markets and applies the Olley and Pakes (1996) framework to estimate total factor productivity (TFP), allowing for different market structures and relaxing the assumption that productivity follows an exogenous Markov process. The results show that firms that start exporting become on average 8.8 percent more productive once they begin exporting, with the productivity gap between exporters and domestic firms increasing over time, reaching 12.4 percent higher productivity growth after 4 years of exporting. These results hold at the industry level and are robust to other controls, including private ownership. Using information on the destination of exports, the study finds that productivity gains are higher for firms exporting to high-income regions. The paper also tests the learning-by-exporting hypothesis, finding that firms that start exporting experience significant productivity gains, both immediately and over time. The results suggest that exporting firms not only become more productive but also grow faster in productivity compared to non-exporting firms. The study contributes to the literature by using a unique dataset and modifying the Olley and Pakes method to account for endogeneity and sample selection. The findings support the learning-by-exporting hypothesis and highlight the importance of export activity in driving productivity growth in a transitioning economy.