The Role of Financial Constraints on Foreign Markets

Crt Kostevc

Management, 2006, vol. 1, issue 2, 131-143

Abstract: Recent research on the role of foreign activities and their impact on firm characteristics has, with few exceptions, confirmed the existence of persistently large differences between exporters and non-exporters in terms of size, investments, innovative activity etc. In spite of the mounting evidence on the advantages of exporters over firms focused solely on their domestic markets, the source of these differences is yet to be explained. The present contribution attempts to analyze the role of financial constraints as one of the factors determining which firms will export and which will not. Through a survey of the existing literature, the role of financial constraints that limit foreign market access to only a subset of the firms, will be revealed. It is shown that financial constraints – even when other factors are explicitly considered (such as firm size, productivity, capital intensity, . . .) – to a large extent determine the firms that will be able to enter into foreign markets, and also mean that financially constrained firms end up exporting less frequently and in smaller quantities than could otherwise be expected.

Keywords: firm heterogenity; exports; productivity; financial constraints (search for similar items in EconPapers)
Date: 2006
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