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Testing The Core-competency Model of Multi-Product Exporters

Listed author(s):
  • Beata Javorcik
  • Peter Neary
  • Carsten Eckel
  • Leonardo Iacovone

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.

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File URL: http://www.economics.ox.ac.uk/materials/papers/14305/paper-768.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 768.

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Date of creation: 02 Dec 2015
Handle: RePEc:oxf:wpaper:768
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  1. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
  2. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
  3. Allanson, Paul & Montagna, Catia, 2005. "Multiproduct firms and market structure: An explorative application to the product life cycle," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 587-597, September.
  4. 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.
  5. Timoshenko, Olga A., 2015. "Product switching in a model of learning," Journal of International Economics, Elsevier, vol. 95(2), pages 233-249.
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