International Sourcing and Firm Learning : Evidence from Serbian Firms

This paper uses merged customs and administrative data from Serbian firms to quantify the impact of neighboring firms’ importing experience on the decision to start sourcing inputs from new markets. The analysis finds that firms are more likely to start importing from a new market if neighboring firms in the same industry and location have experience importing from that market and if those firms are increasing their imports over time. Further, the results support a distinction between imports and exports for the decision to enter foreign markets; unlike exports, import sourcing choices are not independent across countries. The analysis finds that imports across origins are substitutes, not complements. The paper also investigates origin-country and firm heterogeneity. The results indicate that the impact of neighboring firms’ importing experience is greater for source countries in the European Union market and for firms that are high productivity, foreign owned, and previous importers. Together, these findings suggest that a firm’s spatial connections are an important contributor to its access to global markets as sources for inputs.