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Uncertainty and the export decisions of Dutch firms

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  • Harold Creusen
  • Arjan Lejour

Abstract

This paper analyses the export market entry decisions of Dutch firms and their subsequent growth or market exit. Exporters, particularly when entering new markets, have to learn about market conditions and to search for new trade relations under uncertainty. In that sense the paper also investigates the role of economic diplomacy and knowledge spillovers from colleague-exporters. We combine detailed international trade data by firm and destination between 2002 and 2008 with firm data and export market haracteristics in order to disentangle the firm and country determinants of successful and less successful export behaviour. First, we find that about 5% of all Dutch exporters have just started in their first market and a similar share of exporters ceases all exports. Still, the starting exporters increase their exports very fast. In each market their export growth in their third year as exporter is about twice as high as for established exporters. Many starters also increase their exports by expanding their number of destinations, but they will retreat swiftly if they are not successful. For all exporters we find that more productive and larger firms are more inclined to enter (additional) export markets, and that larger firms are less likely to leave a market. Market characteristics are important as well. Distance and import tariffs reduce the probability to enter the market and increase the probability to exit. Not only distance to the home country matters, but also the distance to export markets already accessed. Firms seem to follow a stepping stone approach for reaching markets further away (physically and culturally). They first enter more nearby markets before moving to more distant markets. Finally, we find that the presence of support offices abroad and trade missions in destination countries, particularly middle income countries, stimulate the entry of new exporters and the growth of export volume. Knowledge spillovers from exporters with the same destinations have also positive effects on market entry.

Suggested Citation

  • Harold Creusen & Arjan Lejour, 2011. "Uncertainty and the export decisions of Dutch firms," FIW Working Paper series 069, FIW.
  • Handle: RePEc:wsr:wpaper:y:2011:i:069
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Marcel van den Berg & Charles van Marrewijk, 2017. "Imports and productivity: the impact of geography and factor intensity," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(4), pages 425-450, May.
    2. repec:esr:resser:bkmnext335 is not listed on IDEAS
    3. Joakim Gullstrand & Maria Persson, 2015. "How to combine high sunk costs of exporting and low export survival," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(1), pages 23-51, February.
    4. Lili Wang & Yong Zhao, 2013. "Does Experience Facilitate Entry into New Export Destinations?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 21(5), pages 36-59, September.
    5. Marco Grazzi & Nanditha Mathew & Daniele Moschella, 2017. "Efficiency, innovation, and imported inputs: determinants of export performance among Indian manufacturing firms," LEM Papers Series 2017/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. Bagir, Yusuf, 2017. "Impact of the Presence of Foreign Missions on Trade: Evidence from Turkey," MPRA Paper 80845, University Library of Munich, Germany.
    7. Peter Bergeijk & Fabienne Fortanier & Harry Garretsen & Henri Groot & Selwyn Moons, 2011. "Productivity and Internationalization: A Micro-Data Approach," De Economist, Springer, vol. 159(4), pages 381-388, December.
    8. Filippo Vergara Caffarelli & Giovanni Veronese, 2013. "Italy�s system for supporting internationalization," Questioni di Economia e Finanza (Occasional Papers) 196, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    strategic export decisions; sequential export market entry and exit; export growth; economic;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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