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Testing The Core-competency Model of Multi-Product Exporters

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  • 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.

Suggested Citation

  • Beata Javorcik & Peter Neary & Carsten Eckel & Leonardo Iacovone, 2015. "Testing The Core-competency Model of Multi-Product Exporters," Economics Series Working Papers 768, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:768
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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, 2021. "Market Size, Competition, and the Product Mix of Exporters," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 5, pages 109-150, World Scientific Publishing Co. Pte. Ltd..
    3. Qiu, Larry D. & Zhou, Wen, 2013. "Multiproduct firms and scope adjustment in globalization," Journal of International Economics, Elsevier, vol. 91(1), pages 142-153.
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    5. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
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    10. 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.
    11. 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.
    12. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151-1199.
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    16. Leonardo Iacovone & BeataS. Javorcik, 2010. "Multi-Product Exporters: Product Churning, Uncertainty and Export Discoveries," Economic Journal, Royal Economic Society, vol. 120(544), pages 481-499, May.
    17. 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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    19. Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2021. "Market Size, Competition, and the Product Mix of Exporters," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 5, pages 109-150, World Scientific Publishing Co. Pte. Ltd..
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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.
    2. Long, Ngo Van & Miao, Zhuang, 2019. "Vertically Differentiated Cournot Oligopoly : Effects of Market Expansion and Trade Liberalization on Relative Markup and Product Quality," Discussion paper series HIAS-E-91, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    3. Ngo Van Long & Zhuang Miao, 2020. "Multiple‐quality Cournot oligopoly and the role of market size," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 932-952, October.
    4. Ingo Geishecker & Philipp J. H. Schröder & Allan Sørensen, 2017. "Explaining the size differences of exporter premia: theory and evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(2), pages 327-351, May.
    5. Aya Elewa, 2018. "Mixed Market Structure, Competition and Market Size: How Does Product Mix Respond?," Working Papers 1245, Economic Research Forum, revised 28 Oct 2018.

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    More about this item

    Keywords

    Core competence model; Export market penetration costs; Flexible manufacturing; Multi-product firms.;
    All these keywords.

    JEL classification:

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

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