Exporter Dynamics, Firm Size and Growth, and Partial Year Effects

Abstract

Two otherwise identical firms that enter the same market in different months, one in January and one in December, will report dramatically different annual sales for the first calendar year of operations. This partial year effect in annual data leads to downward biased observations of the level of activity upon entry and upward biased growth rates between the year of entry and the following year. This paper examines the implications of partial year effects using Peruvian export data. The partial year bias is very large: the average level of first-year exports of new exporters is understated by 65 percent and the average growth rate between the first and second year of exporting is overstated by 112 percentage points. This paper re-examines a number of stylized facts about firm size and growth that have motivated rapidly expanding theoretical and empirical literatures on firm export dynamics. Correcting the partial year effect eliminates unusually high growth rates in the first year of exporting, raises initial export levels, and shifts 10 percent of market entrants from below to above the median size. Revisiting an older set of facts on firm size and growth, the paper finds that correcting for partial year biases reduces the number of small firms in the firm size distribution and weakens the negative relationship between firm growth and firm size.

Benefits of foreign ownership: Evidence from foreign direct investment in China

“…Here we need to acknowledge a potential issue for our identification of domestic and foreign 11 Our results do not change qualitatively if we exclude the firms that change their registration types multiple times during our sample period. Results are available upon request.…”

“…Then foreign-acquired domestic firms are matched with their domestic-acquired counterparts and the performance of these two groups of acquisitions are compared. 11 We also employ several other classifications of domestic and foreign acquisitions as robustness checks and will report their results later. Note that most of these firms were collectively-owned rather than truly state-owned.…”

“…Our annual data may suffer from the partial year effects discussed in Bernard et al (2014). As a robust check for the partial year effects, we repeat our logit model of the propensity score matching by using firms' pre-acquisition characteristics two years before the acquisition.…”

Price, Product Quality, and Exporter Dynamics: Evidence From China

“…See Kugler and Verhoogen (2012) or Fan et al (2015) for examples. 9 As documented in Berthou and Vicard (2015) and Bernard et al (2017), estimates of sales growth may be biased by partial-year sales in the first year. Among electric kettle exporters, firms tend to ship once per year regardless of whether they are new or incumbent exporters to a given destination.…”

The Hazardous Effects of Antidumping

“…The bias discussed in Bernard et al (2013) is likely small in duration studies because the key piece of information on a trade flow in duration studies is its sheer existence, rather than its value. 10 In the United States, an AD investigation begins when the domestic industry simultaneously files a petition with the U.S. Department of Commerce (USDOC) and the U.S. International Trade Commission (USITC).…”