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The Decision to Enter and Exit Foreign Markets: Evidence from U.K. SMEs

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  • Francisco Requena-Silvente

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Abstract

This paper studies the dynamics of the export behaviour of small and medium sized enterprises (SMEs) in the U.K. between 1994 and 1998. I use a dynamic empirical model to disentangle three distinct dimensions of a firms’ participation in foreign markets: sunk cost induced hysteresis, firm heterogeneity and macroeconomic instability. The results show that SMEs view exporting as an irreversible investment, with state dependence being the largest explanatory factor. Moreover, observable firm characteristics, such as size and ownership, play a significant role in distinguishing exporters from non-exporters. Finally, there is no evidence that the 1992–1993 recession influenced firms’ export decisions in subsequent years implying that the results provide a valid indication of SMEs "typical" export behaviour. Copyright Springer 2005

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File URL: http://hdl.handle.net/10.1007/s11187-003-6460-x
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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 25 (2005)
Issue (Month): 3 (October)
Pages: 237-253

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Handle: RePEc:kap:sbusec:v:25:y:2005:i:3:p:237-253

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Web page: http://www.springerlink.com/link.asp?id=100338

Related research

Keywords: entry-exit decision; markets; probit; panel techniques;

References

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  1. Campa, Jose Manuel, 2004. "Exchange rates and trade: How important is hysteresis in trade?," European Economic Review, Elsevier, vol. 48(3), pages 527-548, June.
  2. Bee Yan Aw & Xiaomin Chen & Mark J. Roberts, 1997. "Firm-level Evidence on Productivity Differentials, Turnover, and Exports in Taiwanese Manufacturing," NBER Working Papers 6235, National Bureau of Economic Research, Inc.
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Cited by:
  1. Arulampalam, Wiji & Stewart, Mark, 2007. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," IZA Discussion Papers 3039, Institute for the Study of Labor (IZA).
  2. Andrianos Tsekrekos, 2013. "Irreversible exit decisions under mean-reverting uncertainty," Journal of Economics, Springer, Springer, vol. 110(1), pages 5-23, September.
  3. Dirk Clercq & Jolanda Hessels & André Stel, 2008. "Knowledge spillovers and new ventures’ export orientation," Small Business Economics, Springer, Springer, vol. 31(3), pages 283-303, October.
  4. de Clercq, D. & Hessels, S.J.A. & van Stel, A.J., 2007. "Knowledge Spillovers and Entrepreneurs’ Export Orientation," ERIM Report Series Research in Management, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasm ERS-2007-038-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  5. Sun, Churen & Tian, Guoqiang & Zhang, Tao, 2011. "When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms," MPRA Paper 35597, University Library of Munich, Germany.
  6. Pradhan, Jaya Prakash & Das, Keshab, 2012. "Exports by Indian Manufacturing SMEs: Regional Patterns and Determinants," MPRA Paper 41804, University Library of Munich, Germany.

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