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Export Decisions of Services Firms Between Agglomeration Effects and Market-Entry Costs

In: Service Industries and Regions

Author

Listed:
  • Henk L. M. Kox

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This chapter tests the role of agglomeration effects on the export decision of services firms. Recent theories on trade with heterogeneous firms predict that export to foreign markets goes along with sunk market-entry costs. Only the more productive firms will be able to absorb such sunk costs, so that ex ante self selection on the basis of productivity may be expected. Recent research by spatial economist suggests however that productivity sorting may also be the result of operating in large-city areas. In this chapter I find strong evidence that the productivity differences between exporting and non-exporting services firms depend on both agglomeration effects and on anticipated market-entry costs in foreign markets. The research is based on a large set of micro-data for Dutch services establishments. Productivity sorting is strongest for markets with heterogeneous services. Productivity self-selection is found to be strongest for services exporters in rural areas and small agglomerations. This is consistent with the finding that urban services firms on average already have a higher productivity.

Suggested Citation

  • Henk L. M. Kox, 2013. "Export Decisions of Services Firms Between Agglomeration Effects and Market-Entry Costs," Advances in Spatial Science, in: Juan R. Cuadrado-Roura (ed.), Service Industries and Regions, edition 127, chapter 0, pages 177-201, Springer.
    • Handle: RePEc:spr:adspcp:978-3-642-35801-2_8
    DOI: 10.1007/978-3-642-35801-2_8
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    Keywords

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    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L8 - Industrial Organization - - Industry Studies: Services

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