Learning from Neighbors’ Export Activities: Evidence from Exporters’ Survival

Abstract

Recent studies in international trade report that new exporters often start selling small amounts and cease exporting in the first year. These findings reflect a substantial amount of uncertainty facing new exporters. In this paper we study whether export activities in the neighborhood reveal information about export profitability and thus enhance new exporters’ performance. Using transaction-level data for the universe of exporters in China over the period of 2001-2005, we find that new exporters’ first-year sales and probability of survival are both higher in cities where there are more existing export activities in the same market (industry or destination country). Export activities in other markets do not generate any positive spillovers, and in some cases we find negative spillovers. Spillovers from processing exporters are weaker. Foreign exporters benefit less from neighboring export activities. The relation between the magnitude of spillovers and the proxies for demand uncertainty is non-monotonic. We empirically verify that our findings are unlikely to be spurious or resulted from spillovers through the credit-constraint or the imported-material channels.

Keywords: knowledge spillovers, uncertainty, export dynamics, multi-product

JEL Classification: F1, F2