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Financial Constraints and Firm Export Behavior

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  • Flora Bellone
  • Patrick Musso
  • Lionel Nesta
  • Stefano Schiavo

    ()

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 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 Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0816.

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Date of creation: 2008
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Handle: RePEc:trn:utwpde:0816

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

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