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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. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Export Promotion: Bundled Services Work Better," The World Economy, Wiley Blackwell, vol. 33(12), pages 1718-1756, December.
  2. Roberto Álvarez & Martin Andersson & Flora Bellone & Loren Brandt & Davide Castellani & Joze P. Damijan & Jose C. Fariñas & Ana M. Fernandes & Helmut Fryges & Holger Görg & David Greenaway & Stefanie , 2007. "Exports and Productivity: Comparable Evidence for 14 Countries," CIE Discussion Papers 2007-11, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  3. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Beyond The Average Effects: The Distributional Impacts of Export Promotion Programs in Developing Countries," IDB Publications (Working Papers) 36718, Inter-American Development Bank.
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  7. Holger Görg & Michael Henry & Eric Strobl, 2008. "Grant Support and Exporting Activity," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 168-174, February.
  8. Andrew Bernard & J Bradford Jensen & Stephen Redding & Peter Schott, 2009. "The Margins of U.S. Trade (Long Version)," Working Papers 09-18, Center for Economic Studies, U.S. Census Bureau.
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  10. 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.
  11. Henk Kox, 2010. "Exports and productivity selection effects for Dutch firms," CPB Discussion Paper 143, CPB Netherlands Bureau for Economic Policy Analysis.
  12. Facundo Albornoz & Hector Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential Exporting," CEP Discussion Papers dp0974, Centre for Economic Performance, LSE.
  13. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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  18. repec:cup:cbooks:9780521848053 is not listed on IDEAS
  19. 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.
  20. 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.
  21. Keith Head & John Ries, 2010. "Do trade missions increase trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 754-775, August.
  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. 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.
  24. Greenaway, David & Kneller, Richard, 2008. "Exporting, productivity and agglomeration," European Economic Review, Elsevier, vol. 52(5), pages 919-939, July.
  25. Lederman, Daniel & Olarreaga, Marcelo & Payton, Lucy, 2006. "Export Promotion Agencies: What Works and What Doesn't," CEPR Discussion Papers 5810, C.E.P.R. Discussion Papers.
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