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Beyond Trade Costs: Firms' Endogenous Access to International Markets

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Author Info
Garcia Pires, Armando José

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Abstract

Contrary to what has been standard in the international trade literature, we argue that firms' access to international markets should not be just reduced to exogenous factors such as trade costs. Instead, we defend that market access can also be endogenous, since firms can affect international trade patterns by acting strategically against rivals. In particular, we endogenize firms' competitiveness through commitment power advantages of R&D. In this setting we show that: (1) higher efficiency of R&D (like low trade costs) makes trade more easy (given that R&D increases the profitability of exports); (2) firms with higher commitment power in R&D are more competitive (since they have larger incentives to innovate) and as a result these firms also have better access to export markets.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5980.

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Date of creation: Dec 2006
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Handle: RePEc:cpr:ceprdp:5980

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Related research
Keywords: commitment power; endogenous asymmetric firms; market access; R&D investment;

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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    Other versions:
  2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics. [Downloadable!]
    Other versions:
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  8. Choi, E Kwan & Harrigan, James, 2004. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
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  21. Finger, J M & Yeats, Alexander J, 1976. "Effective Protection by Transportation Costs and Tariffs: A Comparison of Magnitudes," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 169-76, February. [Downloadable!] (restricted)
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