Globalization drives strategic product switching |
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Authors: | Veerle Miranda Marialuz Moreno Badia Ilke Van Beveren |
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Institution: | 1.International Monetary Fund,Washington,USA;2.CES and LICOS,Katholieke Universiteit Leuven,Leuven,Belgium;3.Organisation for Economic Co-operation and Development,Paris Cedex 16,France;4.Department of Business Studies,Lessius Antwerp,Antwerpen,Belgium |
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Abstract: | Using firm-level panel data for Estonia, we analyse the impact of international competition on firm dynamics, considering
both firm closedown and product switches. We contribute to the literature in two important ways: first, this is the first
paper to study the determinants of exit and product switching in an emerging market; and second, we consider explicitly the
role of export opportunities. Our results indicate that globalization does not affect firm exit significantly but it is an
important factor explaining why firms choose a different core product. Previous studies on industrial countries have shown
that product switching has been a defensive strategy against low-cost imports. In contrast, our results suggest that Estonian
firms change their core products as an offensive strategy to take advantage of the export opportunities created by a globalized
economy. |
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