The Portrait of Success: Firms in International Trade

This article sets a portrait of firm heterogeneity associated to international activities, showing how they differ from firms oriented exclusively towards the domestic market and the impact of trade flows along several dimensions: trade status, product and country extensive margins of exports and imports, and trade with different type of partners (developed vs. less developed countries). These first descriptive approaches are complemented with regressions by ordinary least squares and fixed effects (controlling for industrial sector, year, foreign ownership, and firm size), allowing the comparison of the results obtained to the findings for other countries for which there are similar works. To this end we use detailed national customs and manufacturing firm survey data of Uruguay for the period 1997-2006. In line with previous works we find that among firms trade is more concentrated than employment and sales, and that two-way traders (firms that both export and import) perform better than only exporters, only importers and domestic firms. Furthermore, we find that the product extensive margin of imports and the country extensive margin of exports have positive effects on two key variables: total factor productivity and employment. Finally, the results are also supportive that firms trading only with high income countries exhibit a better performance than firms trading only with Mercosur partners, but the best performing firms are those that trade with both types of markets.