Sequential Exporting Across Countries and Products
112 Pages Posted: 4 Dec 2021
How do exporters enter and expand their product scope and geographical presence? We show that exporters add products and countries sequentially, in an interdependent process. This process can be explained by a mechanism where new exporters are uncertain about the profitability of their products in different markets, but learn it as they start to export. Exploiting disaggregated data on French exporters, we find empirical evidence consistent with such a mechanism, where firms learn from their initial export experiences and adjust their sales, number of products and destination countries accordingly. Our results indicate that part of the learning is firm-specific, and not merely product- or market-specific. Furthermore, we find that firms tend to expand in the sub-extensive margin first by widening product scope within a destination and later by entering new destinations; and that firms' core products are particularly resilient despite being used to ``test the waters" when entering additional countries.
Keywords: Export dynamics, experimentation, Uncertainty, multiproduct firms, market interdependence
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