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Testing The Core-Competency Model Of Multi-Product Exporters

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  • Eckel, Carsten
  • Iacovone, Leonardo
  • Javorcik, Beata
  • Neary, J Peter

Abstract

We review the implications of the "core competence" model of multi-product firms, including the "market-size paradox": for most countries, the world market is much larger than the home market, while the costs of accessing foreign markets are relatively low; hence the model predicts that most domestic firms should export more of their core products than they sell domestically; yet, in practice, we do not observe this. Extending the model to allow for investment in export market penetration resolves the puzzle, and Mexican data confirm its predictions: in particular, only the largest firms exhibit the dominance of exports over home sales.

Suggested Citation

  • Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J Peter, 2016. "Testing The Core-Competency Model Of Multi-Product Exporters," CEPR Discussion Papers 11049, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11049
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    References listed on IDEAS

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    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    2. Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2014. "Market Size, Competition, and the Product Mix of Exporters," American Economic Review, American Economic Association, vol. 104(2), pages 495-536, February.
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    10. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
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    13. Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2014. "Market Size, Competition, and the Product Mix of Exporters," American Economic Review, American Economic Association, vol. 104(2), pages 495-536, February.
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    Cited by:

    1. Urška Čede & Bogdan Chiriacescu & Péter Harasztosi & Tibor Lalinsky & Jaanika Meriküll, 2018. "Export characteristics and output volatility: comparative firm-level evidence for CEE countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 347-376, May.

    More about this item

    Keywords

    core competence model; export market penetration costs; flexible manufacturing; multi-product firms;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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