Internetization and the markups of export firms: Evidence from China

Guobing Shen, Binchao Shen, Ruochen Wu and Zhengyu Yuan

Economic Modelling, 2023, vol. 120, issue C

Abstract: Can internetization help Chinese exporting firms escape the “low markup trap”? We contend that it does, as internetization improves firms' capabilities and efficiencies in gathering and communicating information. We incorporate information costs and firm innovation choice into a heterogeneous firm model to test this hypothesis. The causality between firm-level internetization and markups is identified with a new instrumental variable designed to capture exogenous shocks to firm-level Internet exposure. After analyzing various internetization strategies, including social media, emails, and homepages, our results indicate that internetization directly increases the markups of Chinese exporting firms. In addition, with the enhanced information availability, internetization stimulates their innovation activities. Thus, we identify innovation as one channel, among others, through which internetization indirectly boosts the markups of China's export firms.

Keywords: Internetization; Social media; Firm innovation; Export; Markups (search for similar items in EconPapers)
JEL-codes: C26 D21 D22 D83 F14 O31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999322004217
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322004217

DOI: 10.1016/j.econmod.2022.106184

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().