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Financial constraints as a barrier to export participation

Author

Listed:
  • Lionel Nesta

    (Observatoire français des conjonctures économiques)

  • Flora Bellone

    (Groupe de Recherche en Droit, Economie et Gestion)

  • Patrick Musso

    (Groupe de Recherche en Droit, Economie et Gestion)

  • Stefano Schiavo

    (Department of Economics [Università di Trento])

Abstract

The paper analyzes the link between financial constraints and firms' export decisions, using a large micro-level data set on French manufacturing firms over the 1996-2004 period. Our main finding is that firms enjoying better ex-ante financial heath are more likely to start exporting. This results contrasts with the previous empirical literature which found evidence that participation to exports market improves a firm financial health but not that export starters display specific ex-ante financial advantages. By contrast, our result supports the view that financial constraints act as a barrier to export participation. This finding has important policy implications as it suggests that, in presence of financial markets imperfections, public intervention can be called for to help efficient but financially constrained firms to overcome the sunk entry costs into export markets and expand their activities abroad.

Suggested Citation

  • Lionel Nesta & Flora Bellone & Patrick Musso & Stefano Schiavo, 2008. "Financial constraints as a barrier to export participation," Sciences Po publications 29, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/6866
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Schmidt-Eisenlohr, Tim, 2013. "Towards a theory of trade finance," Journal of International Economics, Elsevier, pages 96-112.
    2. Marina-Eliza Spaliara & Holger Görg, 2009. "Financial health, exports, and firm survival: A comparison of British and French firms," Discussion Paper Series 2009_18, Department of Economics, Loughborough University.
    3. Strasser, Georg, 2013. "Exchange rate pass-through and credit constraints," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 25-38.
    4. Alexander Eickelpasch & Alexander Vogel, 2009. "Determinants of Export Behaviour of German Business Services Companies," Working Paper Series in Economics 123, University of Lüneburg, Institute of Economics.
    5. Christian Arndt & Claudia Buch & Anselm Mattes, 2009. "Barriers to Internationalization: Firm-Level Evidence from Germany," IAW Discussion Papers 52, Institut für Angewandte Wirtschaftsforschung (IAW).
    6. Halldin, Torbjörn, 2012. "External finance, collateralizable assets and export market entry," Working Paper Series in Economics and Institutions of Innovation 268, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

    More about this item

    Keywords

    Export; Firm heterogeneity; Financial constraint; Sunk costs;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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