Home market economic development as a moderator of the self-selection and learning-by-exporting effects

Ferran Vendrell-Herrero, Christian Darko, Emanuel Gomes, David Lehman

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Abstract

Prior research suggests that firm productivity and export activity are mutually reinforcing. Highly productive firms are more likely to enter the export market (i.e., self-selection), and upon doing so, achieve greater productivity levels over time (i.e., learning-by-exporting). We consider how a critical yet unexamined, factor impacts this relationship: the economic development of a firm’s home market. Drawing on institution-based theories, we hypothesize that self-selection effects will be strongest among firms in more developed economies. Drawing on knowledge-based theories, we hypothesize that learning-by-exporting effects will be strongest among firms in less developed economies. Taken together, we posit that firm productivity and export activity indeed reinforce one another; however, the strength of each direction of the relationship will be amplified, at least in part, by the presence of the opposite home-market economic conditions. Analysis of longitudinal data from the World Bank Enterprise Surveys composed of responses from 3431 manufacturing firms across 63 countries from 2006 to 2017 supports the proposed hypotheses.
Original languageEnglish
Pages (from-to)1519-1535
Number of pages17
JournalJournal of International Business Studies
Volume53
Issue number7
Early online date8 Jan 2022
DOIs
Publication statusE-pub ahead of print - 8 Jan 2022

Bibliographical note

Not yet published in issue as of 20/01/2022

Keywords

  • World Bank Enterprise surveys
  • firm internationalization
  • home-market economic development
  • learning-by-exporting
  • self-selection
  • total factor productivity

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