Entry on Export Markets and Firm-Level Performance Growth: Intra-Industrial Convergence or Divergence?
AbstractThis paper investigates theoretically and empirically the endogenous investment decision of firms conditioning on export decision. It shows that theoretically, whatever the form of preferences, firms that start exporting invest more and grow more than the others. However, it is shown that when preferences are CES, within each category of firms (domestic and switchers), initial productivity and investment are strategic complements, inducing intra-industrial divergence. On the contrary, when preferences are quadratic, initial productivity and investment are strategic substitutes: less productive firms invest more and grow more than the others, inducing intra-industrial convergence. Empirical results on French data support the predictions of the quadratic preferences model.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.153.
Date of creation: Dec 2010
Date of revision:
Export Decision; Investment; Firm Heterogeneity;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-12 (All new papers)
- NEP-BEC-2011-02-12 (Business Economics)
- NEP-CSE-2011-02-12 (Economics of Strategic Management)
- NEP-ENT-2011-02-12 (Entrepreneurship)
- NEP-INT-2011-02-12 (International Trade)
- NEP-SBM-2011-02-12 (Small Business Management)
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