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Importing exporters and exporting importers: A study of the decision of Chinese firms to engage in international trade

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  • Robert J.R. Elliott
  • Nicholas J. Horsewood
  • Liyun Zhang

Abstract

This paper examines the complex and interdependent relationship between importing and exporting for a panel of Chinese manufacturing firms. We estimate the decision to import and export simultaneously within a dynamic random‐effects bivariate probit framework addressing the endogenous initial conditions problem. Results show that decisions to export and import are simultaneously determined and that sunk‐entry costs play a significant role in a firm's decision to enter international markets. Costs are larger for exporting. We also find a substitution effect between the two decisions. The substitutability between exporting and importing is greater for financially constrained private firms.

Suggested Citation

  • Robert J.R. Elliott & Nicholas J. Horsewood & Liyun Zhang, 2019. "Importing exporters and exporting importers: A study of the decision of Chinese firms to engage in international trade," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 240-266, February.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:1:p:240-266
    DOI: 10.1111/roie.12374
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    Cited by:

    1. Juan A. Sanchis Llopis & Silviano Juan A. Mañez Castillejo & Andrés Mauricio Gómez-Sánchez, 2022. "The dynamic linkages between exporting and importing in Colombian manufacturing," Working Papers 2203, Department of Applied Economics II, Universidad de Valencia.
    2. Corradini, Carlo & D'Ippolito, Beatrice, 2022. "Persistence and learning effects in design innovation: Evidence from panel data," Research Policy, Elsevier, vol. 51(2).
    3. Dolores Añon Higón & Juan A. Daniel Bonvin, 2023. "Do digitalization spurs SMEs’ participation in foreign markets?," Working Papers 2307, Department of Applied Economics II, Universidad de Valencia.

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