Internet and firms’ exports and imports: Firm level evidence from China

Abstract

AbstractThis study investigates the impact of the Internet on Chinese firms' export and import performance by using China's industrial enterprise and customs data and adopting a propensity score matching difference‐in‐differences method (PSM‐DID). The empirical results show that utilising the Internet has positive effects on firms' exports and imports; however, the effects are mainly concentrated in the first 2–3 years. The positive effect on exports is larger than on domestic sales; thus, the Internet increases export intensity. Further, we investigate the effects of the Internet on the three margins of Chinese exports. First, we borrow the multi‐product multi‐destination firm exporting theory developed by Bernard et al. (The Quarterly Journal of Economics, 126, 2011, 1271) and find that the Internet improves not only the extensive margin between firms, but also the within‐firm extensive margin. We then investigate the effects of the Internet on product quality and find that the Internet has a negative effect since Chinese firms export more products to developing countries than to other countries, where the requirements for product quality are relatively low. Our findings empirically justify the ‘Internet Plus’ strategy proposed by the Chinese government with regard to international trade.