Does Experience Facilitate Entry into New Export Destinations?

Abstract

Using a large panel dataset that covers 116 countries and 5013 products over the period 1998–2010, this study evaluates the effects of export experience on the geographic expansion of China's exports. The results suggest that past export experience in geographically close and culturally similar markets plays a crucial role in facilitating new market entry, and the positive spillover effects are more pronounced for incumbent and successful products. The results also indicate that spillovers from export experience are market‐specific and product‐specific, and they are limited to within the same product class and the same market, with little cross‐group effects. Finally, there is no strong evidence that export experience is more important for differentiated products than for homogeneous products, and the positive spillover effects are remarkable for both categories of products.

Learning from Neighbors and Differentiating Export Quality

“…In practice, the uncertainty of quality preference for product k in country j is heterogeneous for each firm and is hard to accurately evaluate. Generally, firms tend to export to new destinations that are similar to the export markets that they served previously due to prior knowledge, which can reduce the uncertainty of export (Wang and Zhao, 2013). To address this concern, we used extended gravity measures capturing the market similarity as the proxy of firms' prior knowledge about quality preference for product k in country j.…”

Market Efficiency, Heterogeneous Trade Costs and Export‐Only Firms

“…Castro et al () also point out that fixed export costs usually vary across firms and they are related to industrial and regional characteristics. Wang and Zhao () also mention that spillovers from exports play a crucial role in the geographic expansion of export destinations, which implies that export experience can be considered as an important factor affecting fixed export costs. Accordingly, we assume that fixed export costs are exogenous and draw from a random distribution Γ( f ).…”