The Internet and Chinese Exports in the Pre-Alibaba Era
37 Pages Posted: 1 Dec 2017 Last revised: 30 Apr 2018
Date Written: November 28, 2017
This paper uses the dramatic expansion of access to the Internet in China to analyze the impact of the Internet on firm performance. The paper combines firm-level production data with province-level information on Internet penetration to examine how the rollout of the Internet across Chinese provinces between 1999 and 2007 influenced firms' export behavior. The econometric strategy enables identifying the impact of the Internet on firm performance in China. The paper shows that the rollout of the Internet boosted manufacturing exports of firms in China, even before the rise of major e-commerce platforms in the country such as Alibaba. The paper takes a closer look at why, focusing on three questions: what aspects of firm performance were affected, what types of firm communication were facilitated, and what dimensions of the new communication medium were relevant? The paper finds that the Internet not only enhanced trade, but also improved overall firm performance. The results are consistent with improvements in communication with buyers and input suppliers. The benefits arose not just from better communication, but from establishing a visible virtual presence, and were enhanced by, but not contingent on, access to broadband.
Keywords: Information Technology, Telecommunications Infrastructure, International Trade and Trade Rules, Common Carriers Industry, Textiles, Apparel & Leather Industry, Plastics & Rubber Industry, General Manufacturing, Pulp & Paper Industry, Construction Industry, Business Cycles and Stabilization Policies, Food & Beverage Industry
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