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Exporting and firm performance: Market entry, investment and expansion

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  • Fabling, Richard
  • Sanderson, Lynda

Abstract

This paper examines input and productivity dynamics of manufacturing firms in the period leading to and following export market entry. We examine 3 possible explanations for the observed productivity gap between exporting and non-exporting firms: self-selection of high-performing firms into exporting; post-entry learning effects; and joint export-investment decisions. We consider both initial entry into exporting and subsequent expansion into new destination markets, showing that capital deepening and employment growth are associated with both types of entry. However, the timing of investment differs between the 2 entry events. The observed dynamics are consistent with a model of investment under uncertainty, in which first-time exporters delay investment to gain more information about the success of their export ventures, while experienced exporters pre-commit to capital deepening in advance of additional market expansion.

Suggested Citation

  • Fabling, Richard & Sanderson, Lynda, 2013. "Exporting and firm performance: Market entry, investment and expansion," Journal of International Economics, Elsevier, vol. 89(2), pages 422-431.
  • Handle: RePEc:eee:inecon:v:89:y:2013:i:2:p:422-431
    DOI: 10.1016/j.jinteco.2012.08.008
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Vithessonthi, Chaiporn, 2016. "Capital investment, internationalization, and firm performance: Evidence from Southeast Asian countries," Research in International Business and Finance, Elsevier, vol. 38(C), pages 393-403.
    2. Sánchez, Patricio & Gallego, Elena & Rivero, Dolores & Lago-Peñas, Santiago, 2014. "El impacto de la internacionalización sobre las empresas: Evidencia empírica para el caso español
      [The impact of internationalization on firms: Empirical evidence for the Spanish case]
      ," MPRA Paper 54602, University Library of Munich, Germany.
    3. Richard Fabling & Norman Gemmell & Richard Kneller & Lynda Sanderson, 2013. "Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand," Working Papers 13_14, Motu Economic and Public Policy Research.
    4. Schmerer, Hans-Jörg & Wang, Luhang, 2014. "Firm Performance and Trade with Low-Income Countries: Evidence from China," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100487, Verein für Socialpolitik / German Economic Association.
    5. Kadri Männasoo & Heili Hein, 2017. "Learning from abroad: Export versus foreign ownership," TUT Economic Research Series 36, Department of Finance and Economics, Tallinn University of Technology.
    6. Takahashi, Ryo & Todo, Yasuyuki, 2015. "Coffee certification and forest quality: A case in Ethiopia," 2015 Conference, August 9-14, 2015, Milan, Italy 211939, International Association of Agricultural Economists.
    7. Richard Fabling & David C Maré, 2015. "Production function estimation using New Zealand’s Longitudinal Business Database," Working Papers 15_15, Motu Economic and Public Policy Research.
    8. Fábio Batista & José Eduardo Matos & Miguel Costa Matos, 2017. "Assessing the Competitiveness of the Portuguese Footwear Sector," GEE Papers 0066, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2017.
    9. Richard Fabling & Lynda Sanderson, 2016. "A Rough Guide to New Zealand's Longitudinal Business Database (2nd edition)," Working Papers 16_03, Motu Economic and Public Policy Research.
    10. repec:taf:nzecpp:v:51:y:2017:i:3:p:302-326 is not listed on IDEAS
    11. Fabling, Richard & Gemmell, Norman & Kneller, Richard & Sanderson, Lynda, 2013. "Estimating Firm-Level Effective Tax Rates and the User Cost of Capital in New Zealand," Working Paper Series 2854, Victoria University of Wellington, Chair in Public Finance.
    12. Takahashi, Ryo & Todo, Yasuyuki, 2017. "Coffee Certification and Forest Quality: Evidence from a Wild Coffee Forest in Ethiopia," World Development, Elsevier, vol. 92(C), pages 158-166.
    13. Lynda Sanderson, 2016. "Barriers to Generating International Income: Evidence from the Business Operations Survey," Treasury Working Paper Series 16/04, New Zealand Treasury.
    14. Michele Bernini & Tania Treibich, 2013. "Killing a Second Bird with One Stone? Promoting Firm Growth and Export through Tax Policy," GREDEG Working Papers 2013-30, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    15. Enzo Cassino & David Oxley, 2013. "How Does the Exchange Rate Affect the Real Economy? A Literature Survey," Treasury Working Paper Series 13/26, New Zealand Treasury.
    16. Isabelle Sin & Richard Fabling & Adam B. Jaffe & David C. Maré & Lynda Sanderson, 2014. "Exporting, Innovation and the Role of Immigrants," Working Papers 14_15, Motu Economic and Public Policy Research.
    17. David C. Maré & Dean R. Hyslop & Richard Fabling, 2017. "Firm productivity growth and skill," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(3), pages 302-326, September.

    More about this item

    Keywords

    Exporting; Market entry; Productivity; Investment;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F10 - International Economics - - Trade - - - General

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