Heterogeneity and Uncertainty in the Dynamics of Firm Selection into Foreign Markets
Mehmet Ulu
Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey
Abstract:
Firm-level data indicates a positive relationship between a firm�s revenues from a market and the number of markets penetrated by that firm, and previous presence in that market. After studying the role of different types of firm and market-specific shocks in firms� selection decisions, I quantify an entry-cost-reducing effect of previous presence in a market, and increasing returns to being in more markets. I find that being in an additional market increases the demand in other markets between 1% and 3% across different sectors. Additionally, a variance decomposition between firm and market-specific heterogeneity and idiosyncratic uncertainty in firms� selection problem indicates that 1) firm-specific heterogeneity explains more of the total residual variation in revenues from foreign markets as opposed to idiosyncratic variation in technology intensive indus- tries than less technology intensive ones and 2) the relative importance of idiosyncratic components diminishes as the level of per capita income of a destination market increases.
JEL-codes: C35 D21 D22 F14 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-bec, nep-int and nep-sog
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1401
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