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Structural Reform and Firm Exports

Posted: 8 Dec 2008  

Alvaro Cuervo-Cazurra

Northeastern University - Department of International Business and Strategy

Luis Alfonso Dau

University of South Carolina; Northeastern University - Department of International Business and Strategy

Date Written: September 5, 2008

Abstract

We analyze the impact of structural reform on firm exports. We argue that structural reform generates new opportunities and reduces transaction costs, inducing firms to improve their efficiency and competitiveness to international levels and, therefore, helps them to export. However, we propose that not all companies benefit equally, because firms differ in how structural reform affects their competitiveness. Thus, we argue that subsidiaries of foreign firms are the main beneficiaries of structural reform, followed by domestic private firms, and finally by domestic state-owned firms. We test these arguments on a sample of the largest companies in Latin America for the period 1990-2005. We find that structural reform induces firms in general to export. Furthermore, it has the highest positive impact on the exports of subsidiaries of foreign firms, followed by domestic private firms. Surprisingly, we find that structural reform has a negative impact on the exports of domestic state-owned firms.

The paper contributes to a better understanding of how changes in institutions affect firm behavior by explaining the mechanisms that link structural reform to firm exports and how these vary across firms. Moreover, it counters the arguments of numerous detractors of globalization who claim that foreign firms are the sole beneficiaries of structural reform by indicating that not only foreign but also domestic private firms benefit from structural reform. The paper also highlights the need to discuss who benefits from structural reform rather than whether structural reform is beneficial or detrimental.

Keywords: Structural reform, firm exports, subsidiaries of foreign firms, domestic private firms, domestic

JEL Classification: F23, L20, P16

Suggested Citation

Cuervo-Cazurra, Alvaro and Dau, Luis Alfonso, Structural Reform and Firm Exports (September 5, 2008). William Davidson Institute Working Paper No. 942. Available at SSRN: https://ssrn.com/abstract=1312002

Alvaro Cuervo-Cazurra (Contact Author)

Northeastern University - Department of International Business and Strategy ( email )

D'Amore-McKim School of Business
313 Hayden Hall, 360 Huntington Avenue
Boston, MA 02115
United States
16173736568 (Phone)
16173738628 (Fax)

HOME PAGE: http://cuervo-cazurra.com

Luis Alfonso Dau

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

Northeastern University - Department of International Business and Strategy ( email )

Boston, MA 02115
United States

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