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Reaching Up and Reaching Out: The Impact of Competition on Firms’ Productivity and Export Decisions

Kate Hynes, Eric Evans Osei Opoku and Isabel K. M. Yan

No 201719, Working Papers from School of Economics, University College Dublin

Abstract: This paper investigates the effect of competition in both the domestic and foreign markets on firm productivity and export decisions using firm level data from 139 countries. Using a Sample Selection Endogenous Treatment (SSET) Poisson model that tackles both the issue of endogenous sample selection and endogenous treatment at the same time, we document robust evidence that strong competition in the domestic market propels firms to be more productive, and rising domestic competition increases firms’ propensity to export. However, firms’ export intensity, i.e. how much they export, is not directly influenced by competition in the domestic market. Moreover, lower competition in the foreign market increases the propensity of domestic firms to export, enlarging the set of exporting firms to firms with relatively smaller export amount.

Keywords: Productivity; Export propensity; Export intensity; Competition; SSET-Poisson model (search for similar items in EconPapers)
JEL-codes: C21 J24 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2017-09
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http://hdl.handle.net/10197/9093 First version, 2017 (application/pdf)

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