Spillover effects and the decision to export in Korean manufacturing firms

Abstract

This study examines region-industry spillover effects on the decision to export using a panel of Korean manufacturing plants over the period 1988–1999. We find that the presence of spillovers from other exporters has a statistically significant positive effect on the decision to export, after controlling for sunk costs to enter new markets, plant characteristics, and other factors that are commonly considered to affect the firm's decision to export goods. The result showing a significant and positive spillover effect on the decision to export is consistent with the studies on firms in developing countries but contrasts with the study on firms in the United States. Thus, we suggest the establishment of export promotion policy based on capturing the important spillover effects caused by proximity and resource reallocation in developing countries. This policy should differ from that in developed countries based on the characteristics of individual firms.