Sequential exporting
We present systematic evidence, based on a panel of firm-level Argentine exports, that fledgling exporters are very different from experienced exporters. In particular, new exporters that survive (a) grow faster in their initial markets and (b) are more likely to enter new markets than old exporters...
| Main Authors: | , , , |
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| Other Authors: | |
| Format: | Text |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.411.3191 http://thema.u-cergy.fr/IMG/pdf/AEE_04_11_2010.pdf |
| Summary: | We present systematic evidence, based on a panel of firm-level Argentine exports, that fledgling exporters are very different from experienced exporters. In particular, new exporters that survive (a) grow faster in their initial markets and (b) are more likely to enter new markets than old exporters. On the other hand, (c) new exporters are also more likely to fail. These distinctions do not apply, however, to firms that either start exporting simultaneously to multiple markets, or that re-start exporting after a break. These empirical findings suggest that firms face significant uncertainty before breaking in foreign markets, and that this uncertainty can only be resolved through experience but has value across markets. We develop a model based on experimentation that rationalizes those findings. We posit that a firm’s export profitability, while initially uncertain, is positively correlated over time and across destinations. This leads to a process of “sequential exporting, ” where the possibility of profitable expansion at the intensive and extensive margins makes initial entry costs worthwhile despite high failure rates. In addition to advancing our understanding of firms ’ decisions to export, our mechanism has novel policy implications. For example, it implies that a reduction in trade barriers in a country |
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