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Digital connectivity and firm participation in foreign markets: An exporter-based bilateral analysis

Author

Listed:
  • Michele Imbruno

    (UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome], Nottingham Center for Research on Globalisation and Economic Policy (GEP))

  • Joël Cariolle

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

  • Jaime de Melo

    (UNIGE - Université de Genève = University of Geneva, FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

Abstract

This paper studies how the bilateral digital connectivity resulting from the deployment of telecommunications SubMarine Cable (SMC) affects firm participation in export markets. Based on a heterogeneous firm model and using an unbalanced panel of bilateral trade data across 48 countries during the period 1997-2014, we find that an SMC connection between two countries is associated with an increase in the number of bilateral exporters in developed countries, together with a reduction in the number of bilateral exporters in developing countries. This negative association between bilateral connectivity and firm participation in export markets appears to be stronger in the poorest developing areas, where firms have lower digital absorptive capacity: Middle East & North Africa and Sub-Saharan Africa. The growth in world connectivity spurred by SMCs deployment has therefore had a heterogeneous effect on firms' decision to export, pushing more firms from high-income countries to enter export markets and some incumbent exporters from lower-income countries to exit them.

Suggested Citation

  • Michele Imbruno & Joël Cariolle & Jaime de Melo, 2025. "Digital connectivity and firm participation in foreign markets: An exporter-based bilateral analysis," Post-Print hal-05570207, HAL.
    • Handle: RePEc:hal:journl:hal-05570207
    DOI: 10.1016/j.jdeveco.2025.103551
    Note: View the original document on HAL open archive server: https://hal.science/hal-05570207v1
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