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Exporting and firm performance: Market entry, investment and expansion

Richard Fabling and Lynda Sanderson

Journal of International Economics, 2013, vol. 89, issue 2, 422-431

Abstract: This paper examines input and productivity dynamics of manufacturing firms in the period leading to and following export market entry. We examine 3 possible explanations for the observed productivity gap between exporting and non-exporting firms: self-selection of high-performing firms into exporting; post-entry learning effects; and joint export-investment decisions. We consider both initial entry into exporting and subsequent expansion into new destination markets, showing that capital deepening and employment growth are associated with both types of entry. However, the timing of investment differs between the 2 entry events. The observed dynamics are consistent with a model of investment under uncertainty, in which first-time exporters delay investment to gain more information about the success of their export ventures, while experienced exporters pre-commit to capital deepening in advance of additional market expansion.

Keywords: Exporting; Market entry; Productivity; Investment (search for similar items in EconPapers)
JEL-codes: D22 D24 F10 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:inecon:v:89:y:2013:i:2:p:422-431