Economics at your fingertips  

Foreign Demand, Competition Strategy, and Export Markups: Evidence from Chinese Multi‐Product Exporters

Ming Xu, Tenglong Zhong, Qian Xie and Hongkui Liu

China & World Economy, 2022, vol. 30, issue 3, 187-209

Abstract: Using Chinese microdata from 2000 to 2013, we document how demand shocks in export markets lead multi‐product exporters to adjust markups across products. We find that, in response to positive demand shocks, quality‐based competitive multi‐product firms increase product markups significantly, particularly for core products, whereas cost‐based competitive multi‐product firms respond by reducing product markups. The reason for this is that positive foreign demand affects markups through two opposite channels: pro‐innovative effects and pro‐competitive effects. Pro‐innovative effects are predominant among quality‐based competitive multi‐product firms, and these firms respond to positive foreign demand shocks by increasing product quality, prices, and markups. Pro‐competitive effects are predominant among cost‐based competitive multi‐product firms, and these firms respond to positive foreign demand shocks by lowering product cost, prices, and markups. We demonstrate the presence of these mechanisms empirically. The results imply that firms with different competition strategies should adopt different measures in response to foreign demand shocks.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)

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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1671-2234

Access Statistics for this article

China & World Economy is currently edited by Yongding Yu

More articles in China & World Economy from Institute of World Economics and Politics, Chinese Academy of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2023-12-09
Handle: RePEc:bla:chinae:v:30:y:2022:i:3:p:187-209