A Behavioral Explanation of Firm’s International Trade Behavior in Emerging Markets

Abstract

In response to the recent call for firm-level analysis in international trade, this study examines the effects of performance-aspiration level, slack resource, and firm inertia on the risk-taking behavior (export) of firms from a behavioral perspective. Using a Chinese pharmaceutical industry dataset consisting of 1904 firm-year observations for the 1998 to 2000 period, this study finds that exports would increase as the focal firm’s performance level falls below or rises above its aspiration levels, and also as the focal firm’s accumulated slack resources increase. However, as an indicator of inertia, firm size can moderate the relationship between performance-aspiration level, slack resources, and export behavior. Larger firms are more risk-averse and less likely to export, or export less than smaller firms, even when their performance-aspiration level is very high, or very low, or the focal firm has accumulated abundant slack resources. This study contributes to the international trade literature by analyzing firm-level factors in response to a call for management theory perspectives on firms’ trade in emerging markets.