Purpose The purpose of this paper is to emphasize the importance of product quality in differentiated-products markets in determining the structure of competition among firms. Design/methodology/approach First, two distinct models of firm heterogeneity are considered as two possible structures for firms’ competition: “price competition” and “quality competition.” Then, the author exploits the bilateral trade data of the world’s 83 largest countries in order to examine a link between the empirical findings and the theoretical models. Findings The empirical findings support a model of “quality competition” rather than “price competition,” in which firms in a country with a comparative advantage in a given product tend to improve their product quality as opposed to lowering production costs, so they compete on the quality-adjusted price. Research limitations/implications This paper used product-level data to examine the spatial pattern of the average export unit value of a product, which is able to answer the question of whether an industry is involved with quality competition. The product-level data used in this study, however, are not ideally suitable for exploring the predictions of a heterogeneous firms’ trade model. Originality/value To the best of the author’s knowledge, this is the first paper that investigates a relationship between the country-product pair of comparative advantages and firms’ self-selection behavior in the product-level data to shed light on the role of product quality in determining the structure of firms’ competition.

In the new global economy, export promotion and job creation have become two central issues for economic sustainability. This study aims to raise awareness of the importance of organizational capabilities in job creation through exports. By emphasizing the role of exports in shaping a linkage between organizational capabilities and job creation, this research focuses on how to improve exports that benefit employment creation in the context of Korean small- and medium-sized enterprises (SMEs). Using survey data of 414 SMEs collected by jointly working with the Korea Federation of SMEs and the Ministry of SMEs and Startups, this study employs a structural equation model to investigate a mediation model that links organizational capabilities to job creation through export growth. The main findings of this study are that both technological and manufacturing capability positively influence export growth; export growth has a positive effect on job creation, fully mediates a positive linkage between technological capability and job creation and also plays a partial mediating role in the relationship between manufacturing capability and job creation. Finally, the present study contributes to the literature on exports and job creation and also provides useful information for SME operators and policymakers.

Purpose The Korean manufacturing sector has undergone structural changes in a transition from labor- to capital-intensive industries. These changes seem to be relevant to the weakening of the export effect on employment that began in 1990. In light of the importance of exports in the Korean labor market, the purpose of this paper is to shed light on the primary reasons why export growth does not lead to sufficient job creation as it did in the past. Design/methodology/approach The authors first use the growth accounting approach to show that the weakening of the linkage between exports and employment is closely related to the composition of export products, which has changed toward being more labor-saving. An empirical analysis (i.e. first difference A-B generalized method of moments estimator) on the employment effect of exports confirms that as the capital-intensity of exports increases employment effect decreases. Findings The main findings of the study can be summarized as follows. First, the reduction in the export effect on exports is highly correlated with changes in the composition of export products. Second, an increase in exports leads to an increase in manufacturing jobs, and the export elasticity of employment decreases as capital-intensity increases. Third, the export elasticity of employment tends to be higher when the export proportion of SMEs’ products is larger. Originality/value Despite the many literatures on the link between exports and employment, there is no consensus on this topic. However, it is generally agreed that the employment effect of exports has been considerably weakened, compared to that of the past, at least in Korea. Nevertheless, few studies attempt to address why this trend has occurred. In this paper, we focus on the structural factors that are the major cause of the weakening of the virtuous cycle between exports and employment. This allows us to provide valuable information to policy makers who are concerned with developing export policies that are related to effective job creation.

The role of across-firm differences in product quality and firms' competitiveness in determining the spatial patterns of within-product export unit values across destinations is examined in this paper. Using product level export data, it is shown that the average export unit value of a product shipped from the USA or Korea increases with distance and decreases with destination market's size. However, within-product average unit values for products exported from China and India decrease with distance and increase with market size. To interpret these different spatial patterns of unit values across exporting countries, model of quality heterogeneity is developed in which firms differ in their workers' skill level and higher-skilled workers show greater productivity in performing tasks that improve product quality. The model predicts that in relatively skill-abundant countries, exporting firms specialize in high-quality products using relatively cheap skilled labor, whereas, in relatively skill-scarce countries, firms that produce lower-quality products are more competitive.

Data from the last half‐century show that revealed comparative advantage in agriculture (manufacturing) is negatively (positively) associated with the rate of decline in labour share in agriculture. Motivated by this finding, the author constructs and calibrates a simple open‐economy model, where there is learning‐by‐doing in manufacturing and industry‐supplied inputs to agricultural production. This paper focuses on the effects of comparative advantage and learning‐by‐doing on structural transformation and calibrate the model to the US and the UK data to estimate key parameters of the model. Quantitative experiments show that holding constant other factors a small difference in a country's comparative advantage can account for a large variation in structural transformation for open economies, which does not require nearly as much differential productivity growth as in closed‐economy models.