A theory of entry into and exit from export markets

Impullitti, Giammario; Irarrazabal, Alfonso; Opromolla, Luca David

doi:10.1016/j.jinteco.2012.11.005

“…The connection between being a two-way trader and probability of export failure finds support in theoretical studies like Kasahara and Lapham (2013), Impullitti et al (2013) and Chaney (2014). In the first study, the authors extended the Melitz (2003) model of monopolistic competition of exporters with different productivities to include imported intermediate inputs and sunk costs for participation in international markets.…”

Section: _________________________mentioning

confidence: 99%

Exit from Exporting: Does Being a Two-way Trader Matter?

Mora

¹

,

Córcoles

²

,

Gandoy

³

2015

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The aim of this paper is to investigate whether the probability of ceasing to export is lower for firms that simultaneously import intermediate inputs and export (vertically specialized firms à la Hummels et al., The nature and growth of vertical specialization in world trade, 2001), once other firm characteristics are controlled for. On the basis of the estimation of a random-effects probit model with panel data, the authors find that the superior characteristics of these types of two-way trading firms (in terms of size, productivity, foreign ownership and skilled labor) explain their greater resistance to losing their status as exporters. However, even when these distinctive traits are controlled for, the effect of sourcing inputs from abroad on export exit is significantly different for large and small firms, playing a role in continuing to export only for the latter. Thus, it seems that small firms which are both importers of intermediates and exporters have an added advantage which enables them to confront the uncertainty of foreign markets in better conditions and translates to a lower likelihood that they will stop exporting.

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“…In the first year where it does so, the firm needs 20 Other theoretical contributions, such as Irarrazabal and Opromolla (2009) or Impullitti et al (2013), also include perperiod fixed costs of export. 21 This can be seen formally from (27) in the Theory Appendix.…”

Section: (B) Alternative Interpretation: Experimenting New Destinationsmentioning

confidence: 99%

Volatility and diversification of exports: Firm-level theory and evidence

Vannoorenberghe

¹

,

Wang

²

,

Yu

³

2016

European Economic Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We show using detailed firm-level Chinese data that, among small exporters, firms selling to a more diversified set of countries have more volatile exports, while the opposite holds among large exporters. This result, which stands in marked contrast to standard portfolio theory for small exporters, is robust to a wide array of specifications and controls. Our theoretical explanation for these observations rests on the presence of fixed costs of exports per destination and short-run demand shocks. In this setup, the volatility of a firm's exports depends not only on the diversification of its destination portfolio but also on whether it exports permanently to all markets. Among small exporters, a more diversified pool of destinations makes the firm more likely to export occasionally to some markets, thereby raising volatility. These results cast doubt on the commonly held belief that diversification must decrease volatility. Terms of use: Documents inJEL-Code: F100.

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“…In the presence of uncertainty and sunk costs to enter in the foreign market, the decision to start or stop exporting can be studied following the literature on investment under uncertainty (see, for example, Impullitti et al, 2012). Firms try to substitute between domestic and foreign sales during periods of economic stress, being more willing to pay the sunk cost for entering a new market and/or shifting part of its output abroad, the so-called survival-driven exports ).…”

Section: Introductionmentioning

confidence: 99%

Exports and domestic demand pressure: a dynamic panel data model for the euro area countries

Bobeica

¹

,

Esteves

²

,

Rua

³

et al. 2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper is released in order to make the research of CompNet generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB, the ESCB, and of other organisations associated with the Network. Terms of use: Documents in AcknowledgementsThe authors would like to thank the participants in the Competitiveness Research Network meeting held at the European Central Bank in July 2014, where a preliminary version of the paper was presented, and an anonymous referee. Elena BobeicaEuropean Central Bank; e-mail: elena.bobeica@ecb.int Paulo Soares EstevesBanco de Portugal; e-mail: pmesteves@bportugal.pt António RuaBanco de Portugal, Universidade Nova de Lisboa; e-mail: antonio.rua@bportugal.pt Karsten StaehrTallinn University of Technology, Eesti Pank; e-mail: karsten.staehr@eestipank.ee Abstract The paper investigates the link between domestic demand pressure and exports by considering an error correction dynamic panel model for eleven euro area countries over the last two decades. The results suggest that there is a statistically significant substitution effect between domestic and foreign sales. Furthermore, this relationship appears to be asymmetric, as the link is much stronger when domestic demand falls than when it increases. Weakness in the domestic market translates into increased efforts to serve markets abroad, but, conversely, during times of boom, exports are not negatively affected by increasing domestic sales. This reorientation towards foreign markets was particularly important during the crisis period, and thus could represent a new adjustment channel to strong negative domestic shocks. The results have important policy implications, as this substitution effect between domestic and external markets might allow the euro area countries under stress to improve their trade outcomes with a relatively small downward pressure on domestic prices.

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A theory of entry into and exit from export markets

Cited by 116 publications

References 33 publications

Exit from Exporting: Does Being a Two-way Trader Matter?

Exit from Exporting: Does Being a Two-way Trader Matter?

Volatility and diversification of exports: Firm-level theory and evidence

Exports and domestic demand pressure: a dynamic panel data model for the euro area countries

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