Survival in export markets
This paper explores the determinants of firm survival in export markets. We build an exporter dynamics model where firms need to pay market-specific sunk and fixed costs to operate abroad and where firm export profitability in each foreign market follows a geometric Brownian motion. Firms also diffe...
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| Format: | Article |
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Elsevier
2016
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| Online Access: | https://eprints.nottingham.ac.uk/35634/ |
| _version_ | 1848795125362196480 |
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| author | Albornoz, Facundo Fanelli, Sebastián Hallak, Juan Carlos |
| author_facet | Albornoz, Facundo Fanelli, Sebastián Hallak, Juan Carlos |
| author_sort | Albornoz, Facundo |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This paper explores the determinants of firm survival in export markets. We build an exporter dynamics model where firms need to pay market-specific sunk and fixed costs to operate abroad and where firm export profitability in each foreign market follows a geometric Brownian motion. Firms also differ ex ante by a constant market-specific profitability shifter. We derive the probability of export survival upon entry in a market and show that it increases with the ratio of sunk to fixed costs and is insensitive to the profitability shifters. Also, we show that the survival probability is unaffected by fixed costs if sunk costs are zero. We take the model to the data using firm-level Argentine export information. We find that survival rates decrease with distance, which the model rationalizes with sunk costs that increase with distance proportionally less than fixed costs. Estimated sunk costs are small. In fact, a counterfactual exercise shows that removing those costs increases aggregate exports by less than 1.5%. Finally, we also find that survival increases with a firm’s export experience. Analogously to distance, the model’s implication of this empirical result is that experience reduces sunk costs proportionally less than fixed costs. |
| first_indexed | 2025-11-14T19:27:07Z |
| format | Article |
| id | nottingham-35634 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:27:07Z |
| publishDate | 2016 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-356342020-05-04T17:56:24Z https://eprints.nottingham.ac.uk/35634/ Survival in export markets Albornoz, Facundo Fanelli, Sebastián Hallak, Juan Carlos This paper explores the determinants of firm survival in export markets. We build an exporter dynamics model where firms need to pay market-specific sunk and fixed costs to operate abroad and where firm export profitability in each foreign market follows a geometric Brownian motion. Firms also differ ex ante by a constant market-specific profitability shifter. We derive the probability of export survival upon entry in a market and show that it increases with the ratio of sunk to fixed costs and is insensitive to the profitability shifters. Also, we show that the survival probability is unaffected by fixed costs if sunk costs are zero. We take the model to the data using firm-level Argentine export information. We find that survival rates decrease with distance, which the model rationalizes with sunk costs that increase with distance proportionally less than fixed costs. Estimated sunk costs are small. In fact, a counterfactual exercise shows that removing those costs increases aggregate exports by less than 1.5%. Finally, we also find that survival increases with a firm’s export experience. Analogously to distance, the model’s implication of this empirical result is that experience reduces sunk costs proportionally less than fixed costs. Elsevier 2016-09-30 Article PeerReviewed Albornoz, Facundo, Fanelli, Sebastián and Hallak, Juan Carlos (2016) Survival in export markets. Journal of International Economics, 102 . pp. 262-281. ISSN 0022-1996 Survival; Export dynamics; Fixed cost; Sunk cost; Productivity; Firm heterogeneity; Geometric Brownian motion http://www.sciencedirect.com/science/article/pii/S0022199616300666 doi:10.1016/j.jinteco.2016.05.003 doi:10.1016/j.jinteco.2016.05.003 |
| spellingShingle | Survival; Export dynamics; Fixed cost; Sunk cost; Productivity; Firm heterogeneity; Geometric Brownian motion Albornoz, Facundo Fanelli, Sebastián Hallak, Juan Carlos Survival in export markets |
| title | Survival in export markets |
| title_full | Survival in export markets |
| title_fullStr | Survival in export markets |
| title_full_unstemmed | Survival in export markets |
| title_short | Survival in export markets |
| title_sort | survival in export markets |
| topic | Survival; Export dynamics; Fixed cost; Sunk cost; Productivity; Firm heterogeneity; Geometric Brownian motion |
| url | https://eprints.nottingham.ac.uk/35634/ https://eprints.nottingham.ac.uk/35634/ https://eprints.nottingham.ac.uk/35634/ |