Uncertainty and Entry into Export Markets

Segura-Cayuela, Rubén; Vilarrubia, Josep M.

doi:10.2139/ssrn.1144564

Cited by 69 publications

(25 citation statements)

References 63 publications

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“…These are meant to capture the possibility of within-industry learning spillovers, emphasized in previous studies of firms' export dynamics (e.g. Hausmann and Rodrik, 2003;Segura-Cayuela and Vilarrubia, 2008). The estimated coefficients for these additional controls were never significant.…”

Section: Robustness Checksmentioning

confidence: 96%

“…Hausmann and Rodrik, 2003;Segura-Cayuela and Vilarrubia, 2008), we have also constructed the variables Exports by other firms i,t−1,k and FDI by other firms i,t−1,k measuring the number of Belgian firms in sector k (at the 2-digit NACE) exporting or having foreign affiliates in country i at t − 1. These controls were never significant when included in our regressions.…”

Section: Firm-level Variablesmentioning

confidence: 99%

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The internationalization process of firms: From exports to FDI

Conconi

Sapir

Zanardi

2016

Journal of International Economics

149

109

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This paper examines firms' choice between serving a foreign market through exports or foreign direct investment (FDI). We begin by unveiling a new empirical regularity: using a unique dataset that allows us to study the dynamics of firms' export and FDI choices in individual destination markets, we show that the overwhelming majority of firms serve a foreign market via exports before establishing affiliates in that market. To explain this pattern, we develop a simple dynamic model of export and FDI choices, in which a firm can only discover its ability to earn profits in a foreign market once it starts serving it. We show that uncertainty can lead to a gradual internationalization process, whereby the firm tests the foreign market via exports, before engaging in FDI. Consistent with the model's predictions, we find that most firms start serving a foreign market through exports; in the first years following export entry, many firms drop out of the foreign market, others survive and expand as exporters, some establish foreign affiliates. We show that a firm's export experience in a foreign market increases its probability of FDI entry; this effect decreases over time and increases with foreign market uncertainty. Our analysis suggests that exports and FDI, although substitutes from a static perspective, may be complements over time, since the knowledge acquired through export experimentation can lead firms to start investing abroad.JEL classifications: F10, D21, F13.

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Section: Robustness Checksmentioning

confidence: 96%

Section: Firm-level Variablesmentioning

confidence: 99%

The internationalization process of firms: From exports to FDI

Conconi

Sapir

Zanardi

2016

Journal of International Economics

149

109

View full text Add to dashboard Cite

show abstract

“…However, a large duration of the pioneers seems to have an heterogeneous e ect on the entry of followers. In particular, on those goods that CEPII (2010) classi es as Consumption goods , having a successful and longlasting pioneer 41 See for example Segura-Cayuela and Vilarrubia (2008) 42 This robustness check is important because there could something particular about a given entry year. For example, products that are started to be exported later have mechanically less time to have followers.…”

Section: Testing Predictionsmentioning

confidence: 99%

“…Within this trade literature on experimentation, we are related to Rauch and Watson (2003); Ruhl and Willis (2009);Albornoz, Corcos, Ornelas, and Pardo (2010);Segura-Cayuela and Vilarrubia (2008) and Eaton, Eslava, Krizan, Kugler, and Tybout (2010).…”

Section: Introductionmentioning

confidence: 99%

New exports from emerging markets: Do followers benefit from pioneers?

Wagner

Zahler

2015

Journal of Development Economics

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Since Arrow (1962), spillovers from pioneer to follower in non-excludable innovations are central to our understanding of endogenous economic growth. Nonetheless, evidence of these spillovers in less-developed economies has been elusive. Our paper contributes by showing novel facts consistent with externalities in new export products. To avoid biases towards ex-post successes, we use data on the universe of customs transactions from Chile (1990Chile ( -2006. We nd that, rst, follower rms are more likely to enter a product if the pioneer rm survives exporting. More importantly, we also nd that pioneers enter and remain smaller than followers, which is indicative that the rst exporter may not be the rm that bene ts the most from the discovery. This fact is inconsistent with the currently standard view in international trade, in which the largest rm would be the rst willing to pay a homogeneous sunk cost of exporting. In contrast, our facts are consistent with the view that smaller pioneer exporters are data producers , whose spillovers bene t larger followers. We o er a simple model to formalize this intuition, based on the idea that large exporters have more choices on how to allocate their managerial capacity. This real option makes large exporters wait, as to assign their marginal manager on the best possible project. In contrast, smaller and more focused rms prefer to be pioneers. JEL classi cation: L26 ; F14; O4.

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“…This idea is related to our paper but -since firms sell directly to consumerstheir model remains silent on the role of institutions and contractual frictions for export dynamics. In a similar spirit, Segura- Cayuela and Vilarrubia (2008) construct a framework where exporters learn about their own potential profits from exporting by observing other exporters. As a consequence, export decisions are correlated across firms due to cross-firm information externalities.…”

Section: Introductionmentioning

confidence: 99%