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Uncertainty and the export decisions of Dutch firms

  • Harold Creusen
  • Arjan Lejour

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.

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Paper provided by FIW in its series FIW Working Paper series with number 069.

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Length: 41
Date of creation: May 2011
Date of revision:
Handle: RePEc:wsr:wpaper:y:2011:i:069
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Order Information: Postal: FIW Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna

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  1. The International Study Group on Exports and Productivity & Mauro Pisu, 2008. "Exports and productivity – comparable evidence for 14 countries," Working Paper Research 128, National Bank of Belgium.
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  14. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Entering New Country and Product Markets: Does Export Promotion Help?," IDB Publications (Working Papers) 36738, Inter-American Development Bank.
  15. Pamina Koenig & Florian Mayneris & Sandra Poncet, 2010. "Local Export spillovers in France," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633782, HAL.
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  18. Christian Volpe Martincus & Antoni Estevadeordal & Andrés Gallo & Jessica Luna, 2010. "Information Barriers, Export Promotion Institutions, and the Extensive Margin of Trade," IDB Publications (Working Papers) 39358, Inter-American Development Bank.
  19. Sebastian Krautheim, 2007. "Gravity and Information: Heterogeneous Firms, Exporter Networks and the 'Distance Puzzle'," Economics Working Papers ECO2007/51, European University Institute.
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  22. Roger Smeets & Harold Creusen & Arjan Lejour & Henk Kox, 2010. "Export margins and export barriers: uncovering market entry costs of exporters in the Netherlands," CPB Document 208, CPB Netherlands Bureau for Economic Policy Analysis.
  23. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Beyond The Average Effects: The Distributional Impacts of Export Promotion Programs in Developing Countries," IDB Publications (Working Papers) 36718, Inter-American Development Bank.
  24. Roberto Alvarez & Ricardo A. López, 2008. "Entry and Exit in International Markets: Evidence from Chilean Data," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 692-708, 09.
  25. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Export Promotion: Bundled Services Work Better," The World Economy, Wiley Blackwell, vol. 33(12), pages 1718-1756, December.
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