Explaining the Diversification Path of Exporters in Brazil: How Similar and Sophisticated are New Products?

Xavier Cirera, Anabel Marin and Ricardo Markwald
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Anabel Marin: SPRU, University of Sussex and Conicet, Argentina
Ricardo Markwald: FUNCEX, Brazil

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: A stylised fact of the economic literature suggests that export diversification is good for economic growth and is associated with economic development. In addition, there is evidence suggesting that the level of sophistication of countries’ exports “matters” for growth and development. This paper contributes to this literature by analysing two unexplored dimensions of export diversification: the degree of relatedness (similarity) and sophistication of new products in relation to existing ones. The objective of this paper is to understand the mechanisms through which firms are able to diversify to less related and more sophisticated activities. We do so using a unique dataset that links data on exports, innovation and firms’ characteristics at the firm level in Brazil. The main findings suggest that i) diversification occurs in very closely related activities, where firms have some core competences, ii) most diversification occurs in new products with lower level of sophistication than existing exports, iii) the degree of diversification and innovativeness of the production basket, and the position that the firm has developed in the domestic market appear to matter for diversification towards more or less distant products.

Keywords: Diversification; Relatedness; Sophistication; Trade; Innovation; Brazil (search for similar items in EconPapers)
JEL-codes: F14 L25 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-ino and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:2611

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