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Financial constraints as a barrier to export participation

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  • Lionel Nesta

    (OFCE)

  • Flora Bellone

    (Groupe de Recherche en Droit, Economie et Gestion)

  • Patrick Musso

    (Groupe de Recherche en Droit, Economie et Gestion)

  • Stefano Schiavo

    (Department of Economic Geography)

Abstract

The paper analyzes the link between financial constraints and firms' export decisions, using a large micro-level data set on French manufacturing firms over the 1996-2004 period. Our main finding is that firms enjoying better ex-ante financial heath are more likely to start exporting. This results contrasts with the previous empirical literature which found evidence that participation to exports market improves a firm financial health but not that export starters display specific ex-ante financial advantages. By contrast, our result supports the view that financial constraints act as a barrier to export participation. This finding has important policy implications as it suggests that, in presence of financial markets imperfections, public intervention can be called for to help efficient but financially constrained firms to overcome the sunk entry costs into export markets and expand their activities abroad.

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Bibliographic Info

Paper provided by Sciences Po in its series Sciences Po publications with number 29.

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Date of creation: Sep 2008
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Handle: RePEc:spo:wpmain:info:hdl:2441/6866

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Keywords: Export; Firm heterogeneity; Financial constraint; Sunk costs;

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References

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Cited by:
  1. Holger Görg & Marina-Eliza Spaliara, 2009. "Financial health, exports and firm survival: A comparison of British and French firms," Kiel Working Papers 1568, Kiel Institute for the World Economy.
  2. Tim Schmidt-Eisenlohr, 2011. "Towards a Theory of Trade Finance," Economics Series Working Papers 583, University of Oxford, Department of Economics.
  3. Alexander Eickelpasch & Alexander Vogel, 2009. "Determinants of Export Behaviour of German Business Services Companies," Discussion Papers of DIW Berlin 876, DIW Berlin, German Institute for Economic Research.
  4. Strasser, Georg, 2013. "Exchange rate pass-through and credit constraints," Journal of Monetary Economics, Elsevier, Elsevier, vol. 60(1), pages 25-38.
  5. Georg H. Strasser, 2011. "Exchange Rate Pass-Through and Credit Constraints: Firms Price to Market as Long as They Can," Boston College Working Papers in Economics, Boston College Department of Economics 788, Boston College Department of Economics, revised 13 Feb 2012.
  6. Halldin, Torbjörn, 2012. "External finance, collateralizable assets and export market entry," Working Paper Series in Economics and Institutions of Innovation, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies 268, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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