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Learning to export from neighbors

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  • Fernandes, Ana P.
  • Tang, Heiwai

Abstract

This paper studies how learning from neighboring firms affects new exporters' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm's own prior knowledge about the market. A positive signal about demand inferred from neighbors' export performance raises the firm's probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters over the 2000-2006 period. Our findings are robust to controlling for firms' supply shocks, countries' demand shocks, and city-country fixed effects.

Suggested Citation

  • Fernandes, Ana P. & Tang, Heiwai, 2014. "Learning to export from neighbors," Journal of International Economics, Elsevier, vol. 94(1), pages 67-84.
  • Handle: RePEc:eee:inecon:v:94:y:2014:i:1:p:67-84
    DOI: 10.1016/j.jinteco.2014.06.003
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    Cited by:

    1. Wang, Jian & Wang, Xiao, 2015. "Benefits of foreign ownership: Evidence from foreign direct investment in China," Journal of International Economics, Elsevier, vol. 97(2), pages 325-338.
    2. Conconi, Paola & Sapir, André & Zanardi, Maurizio, 2016. "The internationalization process of firms: From exports to FDI," Journal of International Economics, Elsevier, vol. 99(C), pages 16-30.
    3. Hu, Cui & Tan, Yong, 2017. "Learning to Import From Neighbors," MPRA Paper 78108, University Library of Munich, Germany.
    4. Muendler, Marc-Andreas & Rauch, James E., 2018. "Do employee spinoffs learn markets from their parents? Evidence from international trade," European Economic Review, Elsevier, vol. 105(C), pages 159-173.
    5. Pavla Vozárová, 2015. "The Role of FDI in Fostering Exports from the Host Country," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(3), pages 94-114, September.
    6. Céline Carrère & Vanessa Strauss-Kahn, 2017. "Export survival and the dynamics of experience," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(2), pages 271-300, May.
    7. Alessia LO TURCO & Daniela MAGGIONI, 2016. "For God's sake. The impact of religious proximity on firms' exports," Working Papers 418, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    8. Kamal, Fariha & Sundaram, Asha, 2016. "Buyer–seller relationships in international trade: Do your neighbors matter?," Journal of International Economics, Elsevier, vol. 102(C), pages 128-140.
    9. Jaime DE MELO & Marcelo OLARREAGA, 2017. "Trade Related Institutions and Development," Working Papers P199, FERDI.
    10. Fernandes, Ana P. & Tang, Heiwai, 2015. "Scale, scope, and trade dynamics of export processing plants," Economics Letters, Elsevier, vol. 133(C), pages 68-72.
    11. Kuznetsova Maria, 2016. "Spatial structure and economic network formation of manufacturing exports in Russia," EERC Working Paper Series 16/08e, EERC Research Network, Russia and CIS.
    12. Aksel Erbahar, 2017. "Market Knowledge: Evidence from Importers," Tinbergen Institute Discussion Papers 17-012/VI, Tinbergen Institute.
    13. Cheong, Juyoung & Won Kwak, Do & Yuan, Haishan, 2017. "Trade to aid: EU's temporary tariff waivers for flood-hit Pakistan," Journal of Development Economics, Elsevier, vol. 125(C), pages 70-88.

    More about this item

    Keywords

    Learning to export; Knowledge spillover; Uncertainty; Export dynamics;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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