Export industry policy and reputational comparative advantage

Abstract

Country-of-origin reputations are endogenized in this paper and it is shown that otherwise identical countries can be correctly perceived as differing in their percentage of high-quality producers. These self-fulfilling reputations determine not only the average quality of a country's exports but also the type of products in which a country specializes. Hence, the pattern of international trade can be determined by this "reputational comparative advantage." An inferior country-of-origin reputation leads to lower national welfare, therefore, several trade and industrial policies that can improve country-of-origin reputation are examined.JEL Classification: F12, F13, J71, L15

Improving “national brands”: Reputation for quality and export promotion strategies

“…2 Note moreover that our paper is one of the very few that focus on country-of-origin reputations rather than on pure informational barriers to entry. Together with Chisik (2003) and Dasgupta and Mondria (2012) we are the first to model self-fulfilling country reputations -and we improve on these previous works by introducing a dynamic model with a more fullfledged quality dimension. Country-of-origin reputations are certainly related to the topic of exporters of an unknown quality, but also encompass a different set of issues.…”

“…Informational barriers to entry in international trade have been studied by Mayer (1984), Grossman and Horn (1988), Bagwell and Staiger (1989), Bagwell (1991), Chen (1991), Mondria (2012, 2013) and Chisik (2003). Mayer (1984) was the first to investigate export subsidies in the presence of initially uninformed consumers but did so without modeling explicitly the process of consumer learning and expectations formation, and relied on pessimistic consumer beliefs.…”

“…The articles that are the most closely related to the present paper are Bagwell and Staiger (1989) and Chisik (2003) who both explore the interplay between country reputation, exporting firm quality and optimal trade policy. While our paper builds on these pioneering works, it departs from them both in the assumptions and in the policy implications.…”

“…We also introduce a richer quality structure with a continuum of quality types rather than only two types; and a richer time structure with an infinite horizon model, while Bagwell and Staiger (1989) use a two-period model and Chisik (2003) considers a static game. We are then able to model the process of reputation formation and investigate the transition dynamics of quality and reputation between steady states, between an uninformed prior and the steady state, or following shocks.…”

The Impact of Country of Origin on Relationship Quality: Empirical Evidence from Automotive Industry

“…The reputation associated with country of origin can be transferred across different brands originating from the same country, thus enhancing the reliability of sellers (Chisik, 2003;Doney & Cannon, 1997;Ganesan, 1994), and increasing the level of customer satisfaction resulting from the purchase decision. Kim (1995) assumed that a positive country image would lead to favourable brand popularity, and consequently enhances brand commitment and loyalty.…”