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Learning to Export from Neighbors

Author

Listed:
  • Ana Fernandes

    (University of Exeter)

  • Heiwai Tang

    (Johns Hopkins University, CESIfo and Centro Studi Luca d'Agliano)

Abstract
This paper studies how learning from neighboring firms affects new exporters' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm's own prior knowledge about the market. A positive signal about demand inferred from neighbors' export performance raises the firm's probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters from 2000 to 2006. Our findings are robust to controlling for firms' supply shocks, countries' demand shocks, and city-country fixed effects.

Suggested Citation

  • Ana Fernandes & Heiwai Tang, 2014. "Learning to Export from Neighbors," Development Working Papers 370, Centro Studi Luca d'Agliano, University of Milano, revised 26 Jun 2014.
    • Handle: RePEc:csl:devewp:370
    as

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    File URL: https://www.dagliano.unimi.it/media/WP2014_370.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    learning to export; knowledge spillover; uncertainty; export dynamics;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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