Industry Differences in the Effect of Export Market Entry: Learning by Exporting?

Abstract

There is extensive empirical evidence pointing to the exsistence of sunk costs to exporting. Only higher productivity firms can profitably cover these and enter export markets. This is the standard explanation for the regularity with which econometric analyses reports that exporters are more productive than non-exporters. But what happens to their productivity trajectory once they have entered? Theory points to the possibiliity of a further productivity boost, attributable to the effects of learning and comptetion, though as yet there is little empirical support for this. We investigate whether this is because the potential for this boost depends upon how exposed to competition the firm is already. We find that industry differences are important in determining whether learning effects boost productivity after export market entry.