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Learning to export and the timing of entry to export markets

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Abstract

Firms that engage in exporting normally enter their first export markets a number of years after beginning to sell locally, then enter subsequent export markets progressively. Standard trade models are essentially static and do not capture these elementary facts about exporting, which biases the estimation of trade patterns and limits understanding of potentially important aspects of firms’ exporting behaviour. This paper proposes a model for the timing of entry to new export markets. The model endogenously generates the timing of entry to each market through a learning mechanism: the fixed cost of entry to a given export market is reduced by the experience gained from having entered other markets. More productive firms are less sensitive to the learning effect and therefore (1) enter markets more quickly and (2) enter larger markets earlier and smaller markets later than less productive firms. These predictions are confirmed using Swedish firm-level data. The latter prediction in particular is difficult to explain using alternative mechanisms and therefore endorses the learning effect as an explanation for the timing of entry. The model additionally predicts that more productive firms export more widely and that firms of all productivity levels enter nearer markets earlier, which are strong features of the data.

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  • Sheard, Nicholas, 2011. "Learning to export and the timing of entry to export markets," Research Papers in Economics 2011:17, Stockholm University, Department of Economics, revised 20 Apr 2012.
  • Handle: RePEc:hhs:sunrpe:2011_0017
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    1. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
    2. Van Biesebroeck, Johannes, 2005. "Exporting raises productivity in sub-Saharan African manufacturing firms," Journal of International Economics, Elsevier, vol. 67(2), pages 373-391, December.
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    Cited by:

    1. Joachim Wagner, 2015. "A Note on Firm Age and the Margins of Exports: First Evidence from Germany," The International Trade Journal, Taylor & Francis Journals, vol. 29(2), pages 93-102, June.
    2. Muñoz Sepulveda, Jesus Angel & Rodriguez, Diego, 2013. "Geographical and Industrial Spillovers in entry decisions across export markets," MPRA Paper 48063, University Library of Munich, Germany.

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    More about this item

    Keywords

    export market entry; learning by exporting; fixed costs; heterogeneous firms;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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