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Uncertainty and the export decisions of Dutch firms

  • Arjan Lejour

    ()

  • Harold Creusen

This paper analyses the export market entry decisions of Dutch firms and their subsequent growth or market exit. When entering new markets, firms have to learn market conditions and have to search for new trade relations under uncertainty. We show that firms follow a stepping stone approach for reaching markets further away (physically and culturally) by including the distance to accessed export markets in our analysis. They first enter more nearby markets before moving to more distant markets. Moreover, we find that the presence of support offices and trade missions in destination countries, particularly middle income countries, stimulate the entry of new exporters and export growth. Knowledge spillovers from firms with the same export destinations have also positive effects on market entry. These conclusions follow from using detailed international trade data by firm and destination between 2002 and 2008 combined with firm data and export market characteristics. We find that about 5% of all Dutch exporters have just started in their first market and a similar share of exporters ceases all exports. Still, the starting exporters increase their exports very fast. In each market their export growth in their third year as exporter is about twice as high as for established exporters. Many starters also increase their exports by expanding their number of destinations, but they will retreat swiftly if they are not successful. For all exporters, we find that more productive and larger firms are more inclined to enter (additional) export markets, and that larger firms are less likely to leave a market. Market characteristics are important as well. Distance to the home country (apart from distance to accessed export markets) and import tariffs reduce the probability to enter the market and increase the probability to exit. Read also: •� Using Stepping Stones to Enter Distant Export Markets , Global Economy Journal 15(1), 2015, p 107-132 and •� Market Entry and Economic Diplomacy , Applied Economic Letters 20(5), 2013, 504-507

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 183.

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Date of creation: Jul 2011
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Handle: RePEc:cpb:discus:183
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  1. Pamina Koenig & Florian Mayneris & Sandra Poncet, 2010. "Local Export spillovers in France," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633782, HAL.
  2. Facundo Albornoz & Héctor Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential exporting," LSE Research Online Documents on Economics 28724, London School of Economics and Political Science, LSE Library.
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  7. Head, Keith & Ries, John, 2009. "Do trade missions increase trade?," CEPR Discussion Papers 7609, C.E.P.R. Discussion Papers.
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  9. Jonathan Eaton, Marcela Eslava, Maurice Kugler, and James Tybout, 2007. "Export Dynamics in Colombia: Firm-Level Evidence," Working Papers eg0038, Wilfrid Laurier University, Department of Economics, revised 2007.
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  12. Volpe Martincus, Christian & Carballo, Jerónimo, 2010. "Beyond the average effects: The distributional impacts of export promotion programs in developing countries," Journal of Development Economics, Elsevier, vol. 92(2), pages 201-214, July.
  13. Roberto Alvarez & Ricardo Lopez, 2006. "Entry and Exit in International Markets: Evidence from Chilean Data," Caepr Working Papers 2006-014, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  14. Mina Yakop & Peter A. G. van Bergeijk, 2011. "Economic diplomacy, trade and developing countries," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 4(2), pages 253-267.
  15. Greenaway, David & Kneller, Richard, 2008. "Exporting, productivity and agglomeration," European Economic Review, Elsevier, vol. 52(5), pages 919-939, July.
  16. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Export Promotion: Bundled Services Work Better," The World Economy, Wiley Blackwell, vol. 33(12), pages 1718-1756, December.
  17. Tibor Besedes & Thomas Prusa, 2006. "Ins, outs, and the duration of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 266-295, February.
  18. Henk Kox & Hugo Rojas-Romagosa, 2010. "Exports and Productivity Selection Effects for Dutch Firms," De Economist, Springer, vol. 158(3), pages 295-322, September.
  19. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Entering new country and product markets: does export promotion help?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(3), pages 437-467, September.
  20. Silviano Esteve-Pérez & Vicente Pallardó-López & Francisco Requena-Silvente, 2011. "The duration of firm-destination export relationships: Evidence from Spain, 1997-2006," Working Papers 1102, Department of Applied Economics II, Universidad de Valencia.
  21. Lederman, Daniel & Olarreaga, Marcelo & Payton, Lucy, 2006. "Export promotion agencies : what works and what doesn't," Policy Research Working Paper Series 4044, The World Bank.
  22. Christian Volpe Martincus & Antoni Estevadeordal & Andrés Gallo & Jessica Luna, 2010. "Information Barriers, Export Promotion Institutions, and the Extensive Margin of Trade," IDB Publications (Working Papers) 39358, Inter-American Development Bank.
  23. Freund, Caroline & Pierola, Martha Denisse, 2010. "Export entrepreneurs : evidence from Peru," Policy Research Working Paper Series 5407, The World Bank.
  24. Roger Smeets & Harold Creusen & Arjan Lejour & Henk Kox, 2010. "Export margins and export barriers: uncovering market entry costs of exporters in the Netherlands," CPB Document 208, CPB Netherlands Bureau for Economic Policy Analysis.
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