Why do some firms stop exporting?

During economic turbulence, such as those caused by the US-China conflict and COVID-19, sunk cost effect has garnered attention in IB literature. As it becomes increasingly difficult to predict export profits, relying on sunk costs for strategic positioning in export markets appears to be a rational decision. However, few studies quantitatively examined sunk cost effect variations, especially in export-exit decision-making. In our study, we quantified sunk cost effect with respect to export performance and export portfolio, specifically in terms of export-exit probability. Our findings indicate that the export-exit rate due to sunk cost effect is less than 50% only if export volume surpasses a certain threshold. Consequently, we have provided an explanation for why export exits still occur in the presence of high sunk costs. Additionally, we have identified that geographic diversification, up to four destinations, has more synergy with sunk cost effect than product diversification, particularly in volatile environments.     

How exporting firms respond to technical barriers to trade?

This paper investigates how technical barriers to trade (TBTs) affect firm exports. The implementation of the “child‐resistance” decision (CR decision) in the EU offers an ideal quasi‐natural experiment to identify the causal effect of TBTs on firm performance. Using data on Chinese firms that exported cigarette lighters between 2004 and 2010, we show that firms exporting to the EU not only adjust their product quality to meet the requirements in the CR decision, but also upgrade their product quality in other dimensions. However, both the export value and export volume to the EU decline. At the same time, less productive exporters are forced to exit from the EU market. Lastly, heterogeneous effects of the CR decision are documented.     

How do threshold firms sustain corporate entrepreneurship? The role of boards and absorptive capacity

As companies move from one stage of their cycle to the next, they often have to revamp their skills and build innovative capabilities to survive, achieve profitability, and stimulate growth. Corporate entrepreneurship (CE) activities give these firms a foundation for building and exploiting these capabilities. In turn, stimulating and sustaining CE requires the infusion of resources and new knowledge into the firm's operations, using multiple external sources. In this paper, we highlight the importance of boards of directors and absorptive capacity for gaining access to varied and current knowledge that enriches CE. We suggest that boards and absorptive capacity complement each other in fueling CE activities. Further, boards can sometimes substitute for poor absorptive capacity and vice versa, influencing the intensity of CE activities. Managing these complementarities (or substitutions) is crucial for sustaining CE initiatives and creating value from them.     

Which manufacturing firms learn by exporting?

Using a longitudinal database (1996–2003) at the plant level, this article analyses the causal nexus between international trade engagement and productivity in Portugal. By applying the propensity score matching and a differences-in-differences estimator, the learning-by-exporting hypothesis is analysed in particular. A higher growth of labour productivity and total factor productivity is found for new exporting firms. To uncover the channels through which the learning effects are driven, the same methodology is applied to some sub-samples. Learning effects are higher for new exporters that are also importers or start importing at the same time. Other factors affecting learning ability are found in firms exporting to more developed markets, in those that achieve a certain threshold of export intensity and mainly for those firms that belong to sectors where Portugal has a comparative disadvantage.     

The role of social networks and institutions in the internationalization of Russian entrepreneurial firms: Do they matter?

Drawing upon network theory and institutional theory, this paper examines the influence of networks on the internationalization of Russian entrepreneurial firms. Our case analysis suggests that within the context of the Russian environment, networks play a much less important role in the internationalization process than it is usually assumed in the literature. For the Russian entrepreneurial firms examined in our study, the most important factor in their internationalization was their engagement in honest business practices that established trust and commitment in their relationships with international business partners. This study underscores the importance of the institutional context of an entrepreneurial firm’s country.     

Does firm size matter in exporting and using FTA schemes?

In this paper, we empirically compare the role of firm size when exporting with that when using free trade agreement (FTA) schemes. We employ a unique survey providing detailed information on FTA use by Japanese affiliates in ASEAN, India, and Oceania. Our findings from the analysis on Japanese affiliates in ASEAN are as follows. First, firm size matters in both decisions on exporting and on using FTA schemes. In particular, firm size is more quantitatively important in decisions on FTA use than on exporting. Second, firms with experience in utilizing FTAs for exporting have an approximately 40% higher probability of using an FTA for exporting to a new country. Third, larger-sized firms use a larger number of FTA schemes.     

How do firms make money selling digital goods online?

We review research on revenue models used by online firms who offer digital goods. Such goods are non-rival, have near zero marginal cost of production and distribution, low marginal cost of consumer search, and low transaction costs. Additionally, firms can easily observe and measure consumer behavior. We start by asking what consumers can offer in exchange for digital goods. We suggest that consumers can offer their money, personal information, or time. Firms, in turn, can generate revenue by selling digital content, brokering consumer information, or showing advertising. We discuss the firm’s trade-off in choosing between the different revenue streams, such as offering paid content or free content while relying on advertising revenues. We then turn to specific challenges firms face when choosing a revenue model based on either content, information, or advertising. Additionally, we discuss nascent revenue models that combine different revenue streams such as crowdfunding (content and information) or blogs (information and advertising). We conclude with a discussion of opportunities for future research including implications for firms’ revenue models from the increasing importance of the mobile Internet.     

How do local and foreign firms compete? Competitive actions in an emerging economy

When foreign and local firms compete, they face competitors acting quite differently from themselves. Specifically, their ability to engage in timely and frequent actions is influenced by, respectively, the Liability of Foreignness (LoF) and the Liability of Localness (LoL). We explore how the trade-off between LoF and LoL influences the aggressiveness of competitive actions firms take in emerging markets. Specifically, we argue that LoF results in weaker government ties that inhibit the aggressiveness of competitive actions of multinational subsidiaries, while LoL results in weaker technological capabilities that inhibit competitive aggressiveness of domestic firms. We apply structural equation modelling on Chinese survey data to test hypotheses derived from these arguments and find empirical support. Our results shed new light on competitive dynamics in an emerging economy.     

How do firms finance their exports? – evidence from China

Using a firm-level production data over the period of 2005–2009 from China, this paper provides a new empirical evidence on how firms finance their exports when they have several financial options. The main results of the paper can be summarized as follows. First, firms who have better access to any finance are more likely to export and export more. More financial options lead to a higher export probability and capacity due to the complementary relation between financial options. Second, of all financial options, the internal finance captured by cash holdings or profit plays the most important role on firms’ export likelihood and volume. Firms rely more on the external finance through borrowing to start exporting, but depend more on issuing stocks to their shareholders to expand their exports. Third, subsample results suggest that the financial option of issuing stocks is generally more important for firms who have worse access to external finance in determining export propensity and quantity, such as private-owned firms, small-scale firms, young firms, and non-eastern firms.     

Financing technology-based small firms in Europe: what do we know?

This paper reviews the evidence on financing technology-based small firms (TBSFs) in Europe. European TBSFs finance new investments by relying primarily on internal funds, due to capital market failures induced by asymmetric information. European venture capital has caught up with US venture capital, but this is mainly because of the growth in UK venture investments. It is unclear whether European venture capital has been able to certify the quality and enhance the growth of funded companies. Compared with the NASDAQ, there is little development of trading in high-tech stocks in Europe: the so-called New Markets established in the 1990s collapsed in the wake of the Internet bubble crash. Public venture capital and research and development (R&D) tax incentives seem to have positively affected high-tech firms.     

How different types of partners influence innovative product sales: Does technological capacity matter?

Extant empirical studies examine the effect of different types of partners on innovative product sales. Although these studies present ambiguous results, little research pays attention to the factors leading to this ambiguity. Therefore, this study investigates how technological capacity affects the relationships between different types of partners and innovative product sales. Based on a sample of manufacturing firms from the technological innovation survey, this study reveals several interesting results. First, for the sales from significantly improved products, technological capacity positively impacts on the links between the sales and collaborations with suppliers and also with customers, but negatively moderates with competitors and with research organization. Second, however, on the sales of marginally changed products, technological capacity negatively affects the collaboration with suppliers, but positively impacts on alliance with research organizations. These results increase understanding of the relationships between different types of partners and innovative product sales.     

Does foreign investment benefit the exporting activities of Vietnamese firms?

Using firm-level data, this paper examines the effects of foreign investment on the exporting behaviour of domestic firms in the Vietnamese manufacturing and service sectors. Applying the Heckman selection model on panel data and following the Wooldridge approach, we find that investment by foreign firms has a significant positive effect on the decision of domestic firms in the same and upstream sectors to export. The proportion of exports of domestic firms declines through horizontal and forward linkages, but increases through backward linkages in the manufacturing sector. However, there is only weak evidence in support of export spillovers on domestic firms in the service sector. We also find that the presence of foreign firms has differing effects on the exporting activities of low- versus high-tech firms in the manufacturing sector.     

The effects of innovative capabilities on exporting: Do institutional forces matter?

We challenge the assumption that innovative capabilities are always beneficial for exporting by developing and testing the premise that export performance is contingent on firm- and location-specific institutional idiosyncrasies. Testing our framework against a large dataset for China, we demonstrate that foreign ownership, business group affiliation, and the degree of marketization of the region where the firm operates positively moderate the effects of innovative capabilities on export performance. Government relationships have a stronger positive moderating effect on the innovation–export relationship in regions with a high level of marketization only. Our findings suggest that the relationship between innovative capabilities and export performance is not uniform but rather contingent upon the institutional setting in which the firm is embedded. These results have important implications for how policymakers promote exporting and open up new theoretical avenues for conceptualizing the internationalization implications of innovation.     

Do entrepreneurial goals matter? Resource allocation in new owner-managed firms

This paper focuses on how entrepreneurial goals affect the resource allocation of new firm owners. It connects research in psychology and management that examines the core motivations of entrepreneurs with research in economics that models the behavior of owner-managers as utility-maximizing rather than profit-maximizing. We hypothesize that new owners with nonmonetary goals allocate their resources differently than do owners with monetary goals and that the differences are meaningful in size. To test these hypotheses, we estimate firm level equations based on economic theories of input demand that show how input quantities depend on owner goals. Data come from a national survey of new U.S. business owners. We find owner goals have both a statistically and substantively significant effect on resource allocation for new firms. Owners with nonmonetary goals put in more of their own and family hours rather than hiring outside employees. Implications for research and policy are discussed.     

How do bankruptcy laws affect entrepreneurship development around the world?

How do bankruptcy laws as formal institutions affect entrepreneurship development around the world? Do entrepreneur-friendly bankruptcy laws encourage more entrepreneurship development at a societal level? We posit that if bankrupt entrepreneurs are excessively punished for failure, they may give up potentially high-return but inherently high-risk opportunities to start new businesses. Amassing a cross-country database from 29 countries spanning 19 years (1990-2008), we find that lenient, entrepreneur-friendly bankruptcy laws are significantly correlated with the level of entrepreneurship development as measured by the rate of new firm entry.     

How do entrepreneurial firms establish cross-border relationships? A global value chain perspective

In the past decade, international entrepreneurship has centered largely on the internationalization of small- to medium-sized enterprises through dispersed production networks. Although network relationships are crucial in entrepreneurial internationalization, the dynamics underlying the establishment and coordination of interfirm linkages remain uncertain and unclear. Using a global value chain framework, this article uses a case study to explore how two small enterprises engage in the establishment of a cross-border alliance. Findings suggest that the global value chain approach provides a better understanding of the governance of global relationships. The study also denotes the room for further improvement in this area.     

How do firms evolve? The patterns of technological evolution of semiconductor subsidiaries

This study draws on concepts from international strategy and evolutionary economics to investigate the development of innovative ability within multinational subsidiaries. The paper develops hypotheses regarding the evolution of subsidiary innovative abilities, and the changes across time of their knowledge sourcing and sharing patterns with other parts of the multinational enterprise and host country firms.The paper analyzes patent data pertaining to foreign subsidiaries of US semiconductor firms and finds support for subsidiary technological development—there are positive changes in the scale and scope of innovative activity across time. The results also suggest that subsidiaries are increasingly embedded in host country knowledge networks—as they mature, subsidiaries increasingly learn and share knowledge locally. Evidence of increasing integration with other firms within the multinational enterprise is weaker.     

Participation in export and Chinese firms’ capacity utilization

This paper first sets up a firm heterogeneity trade model and shows that given capital stock and productivity, export firms will have higher rates of capacity utilization. In addition, given capital stock and fixed export costs, firms with higher productivity are more likely to export. I then use the 2012 Chinese enterprise survey from the World Bank to empirically investigate the impact of participation in export on Chinese firms’ capacity utilization rate. The results show that on average, export firms have capacity utilization rate 1.55–2.01 percent higher than non-export firms, which amounts to 14.6–18.9 percent of the standard deviation of capacity utilization rate in the sample. I also find that firms with a larger part of shares owned by the government have lower capacity utilization. Stronger market competition leads to over-investment and therefore lower capacity utilization rate. Faced with more rigorous labor market regulation, firms will substitute capital for the use of labor, resulting in higher capacity utilization rate.     

How do standard setters define materiality and why does it matter?

Material information is a core aspect of a firm's governance and reporting activities. If corporate information is material, then the firm has a responsibility to disclose it. Currently, firms must judge information as material largely based on a confusing set of standard setters’ definitions. I analyze the particular conditions laid out by each standard setter and explain the ethical implications that result from materiality judgments made by firms using these varied standards. Importantly, this analysis underscores that regulators, firms, and researchers alike must consider the impact of these implications on the fiduciary duty and promise-keeping that firms make as well as the potential for unfairness and financial harm to others’ welfare that could result.     

“No sale” items in auctions: do they really matter?

Research interest in auctions has grown steadily in nearly every business discipline because of the distinctive constructs and processes that the data analyses yield. Auction data present researchers with a particular challenge because of the presence of no sale items. Researchers have varied in their accommodation of no sale items and the analysis technique, which may lead to biases in the analyses. The first question is how should no sale items be treated? To address this, the type of data generated by auctions must be examined, since various methods handle no sale items differently. Additional questions are: What analysis technique is preferred for this type of data? What is the effect of using other analysis techniques? The results suggest that including no sale items improves estimation accuracy. Also, we found that using ordinary least squares with censored data provides results that are much better than using truncated data.