Firm heterogeneity and exports in the Netherlands: Identifying export potential beyond firm productivity

Steven Brakman, Harry Garretsen, Raoul van Maarseveen and Peter Zwaneveld

The Journal of International Trade & Economic Development, 2020, vol. 29, issue 1, 36-68

Abstract: According to the Melitz [2003. ‘The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.’ Econometrica 71: 1695–1725] model, potential exporters have to be sufficiently productive to overcome the entry costs of foreign markets. Once firms pass this productivity threshold, they all export. However, empirical evidence indicates that a substantial share of highly productive top-performing firms does not export. In this paper, we focus specifically on this group of high-performing non-exporters and identify the factors that prevent them from successfully exporting. We employ a large Dutch administrative dataset containing both small and large firms in services and manufacturing for the period 2010–2016. Our main findings are two-fold. First, controlling for high productivity identifies other factors that need to be fulfilled for exporting firms. Firm size, import status, and foreign ownership are important determinants of a firm’s future export activity. Second, firm location is crucial. A location in more peripheral areas increases the probability that high-productive firms do not export, whereas a location close to the border increases export probabilities.

Date: 2020
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DOI: 10.1080/09638199.2019.1631876

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