 Playing the lottery or dressing up? A model of firm-level heterogeneity and the decision to exportWim Naudé, Thomas Gries and Natasa Bilkic The Quarterly Review of Economics and Finance, 2015, vol. 58, issue C, 1-17 Abstract: In models of firm heterogeneity whether firms export or not depends on their productivity. These models assume that firms enter a market only to find their productivity levels revealed to them as in a lottery. However, if productivity is not determined as in a lottery, why do some firms export early and some late? In this paper we propose a model of firm heterogeneity to address this question. In our model exporting is an investment decision with a real option value. Our model illustrates that whether not a firm exports is a matter of timing. Some firms may always find it more worthwhile to postpone exporting, depending on the nature of the product, the target market, and firm-level characteristics. For instance, our model shows that firms evaluating exporting to a volatile, or two foreign market, will need more time to dress up (prepare) for this. We derive implications for policies to support exporting. Keywords: International entrepreneurship; Firm-level heterogeneity; Start-ups; Real options; Stochastic dynamic programming (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:58:y:2015:i:c:p:1-17 DOI: 10.1016/j.qref.2015.02.010 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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