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Globalization Drives Strategic Product Switching

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  • Marialuz Moreno Badia
  • Veerle Slootmaekers
  • Ilke Van Beveren

Abstract

Using firm-level data for Estonia for the years 1997-2005, we analyze the impact of international competition on firm dynamics, considering both firm closedown and product switching. We contribute to the literature in two important ways: (1) this is the first paper to study the determinants of exit and product switching in an emerging market; and (2) we consider explicitly the role of export opportunities. Our results indicate that globalization does not affect firm exit significantly but it is an important factor explaining product switching. Previous studies on industrial countries have shown that product switching has been a defensive strategy against low-cost imports. In contrast, our results suggest that Estonian firms have switched products as an offensive strategy to take advantage of the export opportunities created by trade liberalization.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/246.

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Length: 44
Date of creation: 01 Oct 2008
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Handle: RePEc:imf:imfwpa:08/246

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Keywords: Corporate sector; Commodity markets; Trade integration; domestic market; international trade; export markets; comparative advantage; industry trade; export market; domestic firms; services sector; export opportunities; foreign ownership; trade liberalization; trade data; foreign markets; import competition; value of exports; wholesale trade; export intensity; trade variables; human capital; negative relationship; product differentiation; transport equipment; global markets; trade flows; metal products; trading partners; trade costs; domestic production; competitive markets; value of imports; efficient firms; impact of trade; direct investment; import penetration; competitive pressure; competition effect; service activities; market entry; transition economies; country of origin; trade values; free trade agreement; entry barriers; trade theories; transition countries; export value; integrated markets; free trade; competitive pressures; commodity trade; trade barriers; economic cooperation; services trade; business services; foreign investment; trade reform; increasing trade; import side; trade agreement; market structure; agreement on trade; state monopolies; trade openness; perfect competition; transition period; international standards; increased competition; global market; export shares; trade sector; domestic market structure; domestic economy; gross capital formation; increasing competition; international trade aspects; service sectors;

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Cited by:
  1. Nakhoda, Aadil, 2012. "The effect of foreign competition on product switching activities: A firm level analysis," MPRA Paper 39167, University Library of Munich, Germany.
  2. Marialuz Moreno Badia & Veerle Slootmaekers & Ilke Van Beveren, 2008. "Globalization Drives Strategic Product Switching," IMF Working Papers 08/246, International Monetary Fund.

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