Financial factors and exporting decisions

Is financial health a determinant of export market participation? Is it an outcome? Using a panel of 9292 UK manufacturing firms over the period 1993-2003, we explore the links between firms' financial health and their export market participation decisions. We find that exporters exhibit better financial health than non-exporters. Yet, when we differentiate between continuous exporters and starters, we see that this result is driven by the former. Starters generally display low liquidity and high leverage, possibly due to the sunk costs which need to be met to enter export markets. Furthermore, we find no evidence that firms enjoying better ex-ante financial health are more likely to start exporting, and strong evidence that participation in export markets improves firms' financial health.     

How innovation impacts firms' export survival: Does export mode matter?

The innovation-export nexus has been extensively explored, while relatively few studies have focused on innovation's impact on firms' export survival and the role of export mode. Using a large panel dataset from China, this research empirically explores how innovation impacts firms' export survival, considering export modes. First, we employ the discrete-time survival analysis model (cloglog) to examine this research addressing the censored issue. Second, the propensity score matching (PSM) methodology is employed to address the selection-bias issue and select the similar firms based on which to compare their Kaplan–Meier survivor probability. Results present a positive role of innovation in the export survival of direct exporters; however, there is an inverted-U relationship between innovation intensity and their survival probability. For indirect exporters, evidence shows an insignificant innovation-export survival nexus. In addition, results show higher export survival for Chinese innovative exporters who are foreign-owned, highly export-intensive, long-lasting in export market, in technology industries. For innovative exporters who export directly, those in medium and low-technological industries and export capital goods are more likely to survive. Our research provides insights for Chinese exporters regarding innovation participation and suggests the government conducting prudent and deliberate design for innovation strategy.     

Standards and export decisions: Firm-level evidence from developing countries

Standards and technical regulations set in importing countries have become a rising concern to exporters, especially to those in developing countries. This paper examines the importance of various types of standards in developing-country firms' export decisions. Drawn from the World Bank Technical Barriers to Trade (TBT) Survey database, we find that different types of standards exhibit sharply distinct relations with firms' intensive and extensive margins of exports. Quality standards are positively correlated not only with firms' average export volume across markets and products but also their export scope, measured by the number of export markets and products. A similar relationship is found between labeling requirements and export scope. Certification procedures, however, are associated with a significant decline in the number of export markets and export products. Our results suggest that different approaches should be taken to address each type of technical regulations. Not all standards need to be negotiated away to boost trade, but negotiations on certification procedures with the aim of reaching Mutual Recognition Agreements (MRAs) can help firms improve economies of scale and scope.     

Where Do Firms Export,How Much and Why?

The empirical finding that exporting firms are more productive on average than non‐exporters has provoked a large theoretical literature based on models such as Melitz ( 2003 ), where more productive firms are more likely to overcome costs associated with trade. This paper investigates how closely the productivity heterogeneity framework fits the data from a firm‐level survey that includes information on export destinations and firm characteristics such as productivity. We find a high degree of unpredictable idiosyncratic participation in export markets by firms and a relatively weak positive correlation between the extent of a firm's export market participation and its export sales. We find that a small number of standard gravity variables provide a close fit to the country‐level determinants of trade but that greater variation results in more difficulty in explaining firm‐specific factors driving exporting behaviour. We also illustrate some elements of the dynamics over time in firm exporting patterns by destination. We show that lagged exporting activity has a significant effect on a firm's current exporting profile.     

The great trade collapse and the Spanish export miracle: Firm‐level evidence from the crisis

We provide novel evidence on the microstructure of international trade during the 2008 financial crisis and subsequent global recession by exploring a rich firm‐level data set from Spain. The focus of our analysis is on changes at the extensive and intensive firm‐level margins of trade, as well as on performance differences (jobs, productivity and firm survival) across firms that differ in their export status. We find no adverse effects of the financial crisis on foreign market entry or exit, but a considerable increase in the export intensity of firms after the financial crisis. Moreover, we find that exporters were more resilient to the crisis than non‐exporters. Finally, while exporters showed a significantly more favourable development of total factor productivity after 2009 than non‐exporters, aggregate productivity declined substantially in a large number of industries in Spanish manufacturing. We also briefly explore two factors that might help explain the surprisingly strong export performance of Spain in the aftermath of the great trade collapse: improved aggregate competitiveness due to internal and external devaluation and a substitutive relationship between domestic and foreign sales at the firm level.     

Foreign sourcing and exporting

The aim of this paper was analysing the role of sourcing intermediate inputs internationally on export decisions and distinguishing whether intermediates are sourced from firms belonging to the same business group or from independent suppliers. To analyse firms' export decisions, we use a specification that also accounts for sunk costs and accumulated experience in export markets (i.e., export market learning). We consider that importing intermediates might have direct and indirect effects (operating through enhanced productivity) on the export participation decision. The direct effects on exporting are isolated once we control for productivity and the effects of belonging to an international group. We use a manufacturing panel data set drawn from the Spanish Survey on Business Strategies (ESEE) for the period 2006–14. Both productivity and inward or outward FDI increase the probability of exporting. Moreover, our results uncover the existence of sunk costs and export market learning, and also the relevant role played by intermediate imports in firms' export choices. Their effects act both through the (indirect) channel of enhancing firms' productivity and through a direct effect related to product upgrading, more competitive selling prices or learning from the firm's import experience.     

Learning to export from neighbors

This paper studies how learning from neighboring firms affects new exporters' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm's own prior knowledge about the market. A positive signal about demand inferred from neighbors' export performance raises the firm's probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters over the 2000-2006 period. Our findings are robust to controlling for firms' supply shocks, countries' demand shocks, and city-country fixed effects.     

Trade and technology adoption

This paper endogenizes firms' choices of production technology in what would be a standard Melitz model otherwise. The responses of firms' productivity to trade liberalization are heterogenous: exporters, on average, improve their level of technology adoption, whereas nonexporters downgrade their level of technology adoption. The degree to which firms adjust production technology depends on domestic market size, export destination market size, trade impediments, and export status. The conflicting empirical results of the impact of trade liberalization on exporters' productivity are rationalized by showing that changes in different trade costs (variable vs. fixed costs) affect firms' productivity differently. We calibrate the model's parameters to match firms' characteristics in the global economy. The results indicate that endogenous productivity increases the gains from trade liberalization.     

Do Financial Constraints Matter for Foreign Market Entry? A Firm‐level Examination

Recent theoretical and empirical contributions stress the importance of financial development for international trade. This paper investigates whether financial constraints matter for foreign market entry at the firm level using dynamic panel data techniques. Dynamic Probit and Tobit models that account for state dependence and unobserved heterogeneity are used to analyse the effect of financial indicators on export activities. The empirical framework tests for heterogeneous effects among different quartiles of the size and productivity distribution, across previous exporters and potential starters, and across different types of industries as those are predicted by theoretical models. The empirical analysis is applied to a large panel dataset of French manufacturing firms over the years 1998–2005. The data contain a high share of small firms that are usually the most likely to be financially constrained. Although financial indicators are significantly correlated with export status and export share, there is no evidence that financial constraints have a direct impact on foreign market participation or sales in foreign markets once observed and unobserved firm heterogeneity is controlled for. This result is robust to using alternative estimation techniques and also holds for subgroups of firms that are more likely to face financial constraints and industries that are more dependent on financial factors.     

Market knowledge: Evidence from importers

Previous firm‐level literature established that there are substantial costs of entry into new export markets. Chaney (The American Economic Review, 104, 2014, 3600) opens the black‐box of entry costs by building a dynamic network model of international trade where firms acquire customers in new destinations through their existing customers in other destinations. Following his conjecture, this paper examines whether firms use their existing suppliers in a destination to find their first clients in those markets. I use a disaggregated data set on Turkish firms' exports and imports for the 2003–08 period, and investigate the effect of import experience on export entry. By identifying import experience using instrumental variables, and shutting down productivity channels with firm‐year fixed effects, I find that having a supplier in the destination country raises the probability of starting to export to that country by 5.5 percentage points on average, revealing a “market knowledge” phenomenon. The paper's main contribution to the literature is finding that firms' country‐specific import experience increases the likelihood of export‐market entry. Digging further to explore heterogeneous effects, I find that this effect does not exist when trading with low‐income countries, but it increases with the destination country's size, proximity, language similarity and the size of its Turkish immigrant community. Moreover, the strength of the firm's relationship with its supplier as proxied by several variables such as the share of imported products that are differentiated increases the probability of export‐market entry.     

Coping with the crisis and export diversification

Using a highly disaggregated firm–product–destination level data from Denmark, we analyse how Danish exporters responded to the global recession in 2008–09 and the recovery that followed. We show that firms reacted mainly by adjusting their scale of export shipments and by extending their export portfolio outside of their core products and markets. More importantly, we also find that export diversification into fast-growing economies like China was associated with better export growth performance. Hence, trade reorientation beyond traditional market destinations accelerated export growth and as such constitutes an important mechanism for understanding the various determinants of firm heterogeneity.     

Exporting and Economic Performance: Firm‐level Evidence of Spanish Manufacturing

In a previous paper, Delgado, Fariñas and Ruano (2002) report TFP differences between exporters and non‐exporters on the basis of a sample of Spanish manufacturing firms. In this paper, we extend the previous analysis in three directions using a similar data set. First, we investigate additional economic performance differences between exporters and non‐exporters. Second, we measure TFP differences estimating production functions that control for unobserved heterogeneity and simultaneity bias. Third, we explore the self‐selection and learning‐by‐exporting hypothesis as explanations for the greater performance of exporters. With respect to the results, we confirm that many indicators of economic performance such as productivity, size, wages and innovation are greater in exporting firms. Furthermore, TFP differences between exporters and non‐exporters estimated with parametric methods are remarkably similar to those estimated using index numbers. Finally, performance differences and transition patterns between the export market and the domestic market indicate higher performance for entering exporters with respect to non‐exporters at the moment of entry. We find evidence of selection in the entry and the exit side of the export market. One of the basic results that we obtain indicates that after controlling for self‐selection, the productivity growth of entering exporters does not significantly change with respect to non‐exporters. As the evidence we find indicates no systematic changes in performance between non‐exporters and exporters after entry takes place, we do not confirm the learning‐by‐exporting hypothesis.     

Export Premium,Self‐selection and Learning‐by‐Exporting: Evidence from Chinese Matched Firms

This study empirically focuses on examining the hypotheses of export premium (exporters are more productive than non‐exporters), selection‐into‐exporting (more productive firms are ones that tend to become exporters) and learning‐by‐exporting (new export market entrants have higher productivity growth than non‐exporters in the post‐entry period). The propensity score matching method is used to adjust for observable differences of firm characteristics between exporters and non‐exporters, allowing an adequate ‘like‐for‐like’ comparison. We also use the difference‐in‐difference matching estimator to capture the magnitude of different productivity growth between matched new export market entrants and non‐exporters in the post‐entry period up to two years. Drawing on 2,340 Chinese firms in the period 2000–02, we find evidence for export premium and self‐selection, and once the firm has entered the export market there is additional productivity growth from the learning effect, in particular in the second year after entry.     

Export Intensification by Firms During Domestic Economic Recession

The present paper investigates the influence of an economic recession in the domestic market on the export marketing behavior of firms. The thesis of the paper is that firms intesify their export marketing efforts in order to overcome domestic adversity, a notion for which there is, at present, very little conclusive evidence. The paper presents findings from an empirical study, involving United States exporters during the 1980-82 recession, that suggest that a domestic recession is a significant export stimulant. Firms which are adversely affected by a recession are more likely than unaffected firms to intensify their exports. The paper also concludes that firms which intensify their exports in response to a recession are likely to exhibit a pronounced emphasis on more tactical and short-term export marketing activities. Finally, contrary to our expectation, the perceived benefits of export intensification during the recession were found to be inversely related to firms' export involvement.     

Exporting and productivity in business services: Evidence from the United States

Does exporting make firms more productive, or do more productive firms choose to become exporters? This paper considers the link between exporting and productivity for a sample of firms in US business services. We find that larger, more productive firms are more likely to become exporters, but that these factors do not necessarily influence the extent of exporting. This conforms with previous literature that there is a self-selection effect into exporting. We then test for the effect of exporting on productivity levels after allowing for this selection effect. We model both the relationship between exporting and productivity, and a simultaneous relationship between export intensity and productivity after allowing for selection bias. In both cases we find an association, indicating that productivity is positively linked both to exporting and to increased exposure to international markets.     

Internet-based corporate disclosure and market value: Evidence from Latin America

We examine the relationship between an Internet-based corporate disclosure index and firm value in the seven largest stock markets of Latin America. We find, after controlling for firms' characteristics, industry and country of origin, that an increase of 1% in the Internet-Based Corporate Disclosure Index causes an increase of 0.1592% in the Tobin's Q and an increase of 0.0119% in the firm's ROA. These findings are robust after considering the potential endogeneity of our regression variables. The evidence contributes to the literature suggesting that firms can differentiate themselves by self-adopting better financial and corporate disclosure measures using the Internet.     

Exporting,demand for skills and skill mismatch: Evidence from employers' hiring practices

We exploit information from a classification of occupations to identify separately formal qualification requirements linked to a job and formal qualifications of a worker who filled the job for the universe of firms in Slovenia. We find that exporters were more likely to hire over‐qualified workers than they did prior to becoming exporters even though they did not change the qualification requirements of their vacancies. Firms were more likely to demand other skills (leadership, knowledge of foreign languages) once they began to export. These findings suggest that skill upgrading by exporters reflects differences in terms of skill demand as well as the way workers match to jobs. This distinction is blurred in existing studies on skill upgrading by exporters because these studies rely solely on the information about the qualifications of hired workers. Our findings are consistent with a framework in which firms become more productive and offer higher wages once they start to export, workers' qualifications and firms' productivity are complementary inputs, and search is costly.     

A comparative study of the export problems of small computer software exporters in Finland, Ireland and Norway

This paper presents the findings of an empirical study into the export problems of small computer software firms in Finland, Ireland and Norway. The study suggests that finance-related problems present exporters with the greatest difficulties and that these problems often intensify with increased international exposure. It also reveals that marketing-related factors tend to decline as firms become more active in export markets. The paper concludes that export policy-makers should seek to address these problems by improvements in training—particularly, in the area of export finance—and by providing a better financial infrastructure, in order to improve the international capabilities of small software firms.     

Export Credit Guarantees and Export Performance: An Empirical Analysis for Germany

Recent literature finds that exporters are particularly vulnerable to financial market frictions. As a consequence, exports may be lower than their efficient levels. For this reason, many countries support exporters by underwriting export credit guarantees. The empirical evidence on the effects of those policies is, however, very limited. In this paper, we use sectoral data on export credit guarantees issued by the German government. We investigate whether those guarantees indeed do increase exports and whether they remedy the export‐restricting effect of credit market imperfections both on the sectoral and on the export‐market levels. Exploiting the sectoral structure of a rich three‐way panel data set of German exports, we control for unobserved heterogeneity on the country‐year, sector‐year and country‐sector dimensions. We document a robust export‐increasing effect of guarantees. There is some evidence that the effect is larger for export markets with poor financial institutions and in sectors that rely more on external finance.     

Do mergers and acquisitions promote trade? Evidence from China

Many studies have shown that mergers and acquisitions (M&A) raise firms' productivity. Few researches investigate whether exporters can enhance export performance after M&A through higher levels of efficiency. Based on detailed information on M&A activities of Chinese firms, China's customs trade data and National Bureau of Statistics surveys, we investigate the causal effect of M&A on trade performance. In particular, the value and the volume of firm exports, product quality, product scope and the number of export destinations have been examined. We find positive and significant effects of M&A on all the examined indicators of export performance. These findings are generally robust to a variety of robustness checks. We further observe that state-owned firms are the least likely to benefit from M&A. We also obtain evidence that firms benefit more from M&A deals if they are targets or merge with foreign firms. Overall, this paper is to our knowledge the first study that uses micro-level data in multiple industries to examine the relationship between M&A and exports of heterogeneous firms. Our results deepen our understanding of the consequences of M&A by suggesting another potential benefit, and hence provide policy implications for merger regulation.