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Is Previous Exporting Experience Relevant for New Exports?

  • Roberto Álvarez
  • Hasan Faruq
  • Ricardo A. López

Recent models of international trade show that trade costs are important determinants of exporting decisions and productivity dynamics. By assuming that these costs are exogenous and constant across firms, these theories do not take into account that experienced firms may have lower trading costs or that new exporters may reduce these costs by observing the decisions of other exporters. This study argues that firms with previous experience exporting a product to a particular market are more likely to start exporting the same product to another market, or a different product to the same market. The paper also contends that the previous experience of other exporters can significantly influence a firm’s decision to introduce a new product to a new market. Using a firm-level dataset from Chile with information on exports by product and destination market, the paper finds that an increase in the cumulative value exported by a firm increases the probability that the firm will export a previously exported product to a different market or a different product to a market to which the firm already exported a product. The results also show that an increase in the cumulative value exported of a product, or to a foreign market, by other exporters raises the probability that firms will export new products and/or to new markets. Our findings are consistent with the idea that previous exporting experience may help reduce the firm’s entry costs to international markets. The rich dataset used in this study allows the identification of these effects controlling for various time-varying observed and unobserved characteristics which may create a spurious correlation between firms’ export decisions, their previous exporting experience, and the export activity of other exporters

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 599.

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Date of creation: Nov 2010
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Handle: RePEc:chb:bcchwp:599
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  1. Manuel Agosin & Claudio Bravo-Ortega, 2009. "The Emergence of New Successful Export Activities in Latin America: The Case of Chile," Research Department Publications 3265, Inter-American Development Bank, Research Department.
  2. Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
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  11. Amin Gutierrez de Pineres, Sheila & Ferrantino, Michael, 1997. "Export diversification and structural dynamics in the growth process: The case of Chile," Journal of Development Economics, Elsevier, vol. 52(2), pages 375-391, April.
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  13. Roberto Alvarez & Ricardo López, 2005. "Exporting and performance: evidence from Chilean plants," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1384-1400, November.
  14. Greenaway, David & Sousa, Nuno & Wakelin, Katharine, 2004. "Do domestic firms learn to export from multinationals?," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1027-1043, November.
  15. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
  16. Alfonso A. Irarrazabal & Luca David Opromolla, 2008. "A Theory of Entry and Exit into Exports Markets," Working Papers w200820, Banco de Portugal, Economics and Research Department.
  17. Antoine Berthou & Lionel Fontagné, 2013. "How do Multiproduct Exporters React to a Change in Trade Costs?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(2), pages 326-353, 04.
  18. Greenaway, David & Kneller, Richard, 2008. "Exporting, productivity and agglomeration," European Economic Review, Elsevier, vol. 52(5), pages 919-939, July.
  19. Stan D Reid, 1981. "The Decision-Maker and Export Entry and Expansion," Journal of International Business Studies, Palgrave Macmillan, vol. 12(2), pages 101-112, June.
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