Broadening or jumping? An analysis of the first export market of European Union firms

Abstract

This paper explores the export activities of international firms from seven European countries with a special focus on the neighbourhoods of Europe, where 16 countries have been included in the neighbouring policy. Using a detailed dataset of the internationalisation activities of nearly 15,000 companies, we focus on the best export destinations of European Union firms. In 2008, only 6% of exporters had at least one neighbouring country in their top three export destinations. We subsequently model the export/no-export activity of each firm and the location of the first export destination by means of a nested logit model and find that this process is driven primarily by geography. No reduction (or even an increase) of the strength of the distance effect can be detected for a firm when exporting outside Europe to nearby countries, meaning that European Union firms do not have any particular advantage in exporting their goods in countries near their borders with respect to all the other possible destinations in the world. The ‘repulsive force’ of distance is alleviated only when moving outside of neighbourhoods where the size of the destination market becomes stronger

The European Union and its neighboring countries: The economic geography of trade, Foreign Direct Investment and development

“…The evidence related to EU-ENP Countries trade activity is still limited. It shows that trade has grown significantly over the past decade and the EU has become the most significant ENP Countries trade partner (Kallioras and Pi nna, 2015;2016). The major trade partners for the ENP Countries are advanced EU 'core' countries, while trade within the internal and external EU periphery remains limited (Petrakos et al, 2013).…”

“…Over the past decade Foreign Direct Investments (FDI) have been playing an increasingly relevant role for the process of functional integration of the world economy (UNCTAD, 2015). A growing body of literature has emphasized their role as engines of the process of globalisation, highlighting their impact on the economic development and innovation potential of recipient countries and regions (McCann & Mudambi, 2005;Beugelsdijk & Mudambi, 2013;Crescenzi et al 2014 and2016). In this perspective FDI can be considered as key components of the process of economic integration between the European Union and the ENP countries.…”

“…The drivers of the establishment of trade linkages between the EU and the ENP countries are explored by Pinna et al (2016). This paper examines empirically the characteristics of European firms which have one of the ENP countries as their main export destination.…”

“…Considering the increasing functional integration between European firms and the ENP economies, it is crucial for EU policy makers to understand what firm level characteristics explain their internationalization strategies. By analyzing a large sample of manufacturing companies in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and the UK), Pinna et al (2016) investigate the drivers of the decision to export and, for exporting firms, the factors that lead to the selection of the first export destination. This approach makes it possible to study what factors-if any-might favor the orientation of EU trade towards the ENP countries.…”

Trade Activity Between the EU and Its Neighbouring Countries: Trends and Potential

“…In particular, Pinna et al . () show that only 6 per cent of a representative sample of EU exporting firms have a neighbouring country in the three most important destination markets. Of course, aggregating the ENCs as a single economic space, things change.…”