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Financial Constraints and Firm Export Behavior

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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 firm export behavior. Our main finding is that firms enjoying better financial health are more likely to become exporters. The result contrasts with the previous empirical literature which found evidence that export participation improves firm financial health, but not that export starters display any ex-ante financial advantage. On the contrary, we find that financial constraints act as a barrier to export participation. Better access to external financial resources increases the probability to start exporting and also shortens the time before firms decide to serve foreign customers. This finding has important policy implications as it suggests that, in presence of financial markets imperfections, public intervention can be called for to help eficient 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 16, 2008.

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Date of creation: Oct 2008
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Handle: RePEc:spo:wpmain:info:hdl:2441/9948

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Related research

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

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References

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