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Do Financial Constraints Matter for Foreign Market Entry? – A Firm-Level Examination

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  • Stiebale, Joel

Abstract

Recent theoretical and empirical contributions stress the importance of financial development for international trade. This paper investigates whether financial constraints matter for foreign market entry at the firm level using dynamic panel data techniques. The empirical framework is applied to a panel of French manufacturing firms over the years 1998-2005. Although financial indicators are significantly correlated with export status and export share, there is no evidence that financial constraints have a direct impact on foreign market participation or sales in foreign markets once observed and unobserved firm heterogeneity is controlled for. This result also holds for subgroups of firms that are more likely to face financial constraints and industries that are more dependent on financial factors.

Suggested Citation

  • Stiebale, Joel, 2008. "Do Financial Constraints Matter for Foreign Market Entry? – A Firm-Level Examination," Ruhr Economic Papers 51, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:51
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    More about this item

    Keywords

    Exports; financial constraints; sunk costs;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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