The Decision to Enter and Exit Foreign Markets: Evidence from U.K. SMEs |
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Authors: | Email author" target="_blank">Francisco?Requena-SilventeEmail author |
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Institution: | (1) Departmento de Economía Aplicada II (Estructura Económica) Facultad de Ciencias Económicas y Empresariales Av. de los Naranjos s/n Edificio Departamental Oriental, University of Valencia, 46022 Valencia, Spain |
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Abstract: | This paper studies the dynamics of the export behaviour of small and medium sized enterprises (SMEs) in the U.K. between 1994
and 1998. I use a dynamic empirical model to disentangle three distinct dimensions of a firms’ participation in foreign markets:
sunk cost induced hysteresis, firm heterogeneity and macroeconomic instability. The results show that SMEs view exporting
as an irreversible investment, with state dependence being the largest explanatory factor. Moreover, observable firm characteristics,
such as size and ownership, play a significant role in distinguishing exporters from non-exporters. Finally, there is no evidence
that the 1992–1993 recession influenced firms’ export decisions in subsequent years implying that the results provide a valid
indication of SMEs "typical" export behaviour. |
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Keywords: | entry-exit decision markets probit panel techniques |
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