Diversification, Networks and the Survival of Exporting Firms

46 Pages Posted: 14 Jun 2011

See all articles by Jorge Tovar

Jorge Tovar

Universidad de los Andes, Colombia - Department of Economics

Luis R. Martinez

University of Chicago - Harris School of Public Policy

Date Written: March 1, 2011

Abstract

There is abundant empirical evidence testing models where comparative advantage arises from firm heterogeneity. As of today it is relatively clear who exports and why a firm decides to export. But, what determines the survival of a firm in the export market? This paper exploits a detailed developing economy monthly firm-level dataset for the period 2001–2008 in order to explore the importance of trade networks and product and market diversification on the survival of exporting firms.

We find that market diversification prevails over product diversification while trade network effects, measured in various ways, are highly correlated to the survival of new exporting firms. From a policy perspective our findings suggest that government aid in the exporting process should focus on expanding into new markets, not on promoting new export products.

Keywords: Firm dynamics, product diversification, market diversification, survival

JEL Classification: F14, L25

Suggested Citation

Tovar, Jorge and Martinez, Luis, Diversification, Networks and the Survival of Exporting Firms (March 1, 2011). Documento CEDE No. 2011-08, Available at SSRN: https://ssrn.com/abstract=1862206 or http://dx.doi.org/10.2139/ssrn.1862206

Jorge Tovar (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

HOME PAGE: http://economia.uniandes.edu.co/profesores/planta/tovar_jorge

Luis Martinez

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

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