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Internet Adoption and Firm Exports in Developing Economies

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  • Jonathan Timmis
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    Abstract

    This paper investigates the effect of Internet technology on how firms access export markets - directly or via intermediaries. Empirical evidence suggests that technology diffusion is geographically localised, with spillover effects from neighbouring firms decaying quickly over short distances. To address the endogeneity of Internet adoption, I construct an instrument that captures these local network effects, by matching IP addresses to firm locations. Using a cross-section of firms in 18 developing countries I find that Internet access magnifies direct trade with no discernible effect on intermediated trade. Adopting the Internet because of local networks increases direct exports as a proportion of firm sales by 32-36%. The analysis is robust to consideration of a wide-range of potentially omitted variables.

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    File URL: http://www.nottingham.ac.uk/gep/documents/papers/2013/2013-05.pdf
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    Bibliographic Info

    Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 2013-05.

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    Date of creation: 2013
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    Handle: RePEc:not:notgep:13/05

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    Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
    Phone: (44) 0115 951 5620
    Fax: (0115) 951 4159
    Web page: http://www.nottingham.ac.uk/gep/index.aspx
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    Keywords: Internet; technology; intermediation; international trade; heterogeneous firms;

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