Exporting and performance - Market entry, expansion and destination characteristics

Release date
01/09/2010
Reference
DP2010/07
Authors
Richard Fabling; Lynda Sanderson
Published as
Fabling, Richard and Lynda Sanderson (2013). ‘Exporting and firm performance: Market entry, investment and expansion’, Journal of International Economics, Elsevier, Volume 89(2), Pages 422-431, DOI: https://doi.org/10.1016/j.jinteco.2012.08.008.
We examine the effect of export market entry on New Zealand firm performance. Our novel contribution to the literature is the treatment of export status as an incremental process, in which firms may export to one or more markets with each of these markets providing additional potential for learning to occur. Focussing on new markets provides several benefits. Since we use matching techniques to account for self-selection, controlling for firm export histories reduces the problem of selection on unobservables (such as managerial preferences) which would confound a causal interpretation. Also, most new market entry is undertaken by incumbent exporters, providing a large number of events on which to test the learning-by-exporting (LBE) hypothesis. Our results suggest a powerful self-selection mechanism into exporting, with strong employment growth for first-time exporters and smaller (but still significant) gains associated with incumbent entry. Capital deepening is also important, though the dynamics differ between first-time and experienced exporters. Together these findings suggest a potentially important aggregate productivity growth effect arising from reallocation of resources to exporters.