The role of firm location and agglomeration economies on export propensity: the case of Portuguese SMEs

Abstract

PurposeThe present study seeks to assess whether the firm's location and agglomeration economies affect the firm's export propensity.Design/methodology/approachThis work is based on a sample of 20,234 Portuguese manufacturing small and medium enterprises (SMEs) and resort to the estimation of a probit model.FindingsEmpirical results show that the location and agglomeration economies have an important role in determining the firm's export propensity. In particular, the study concludes that SMEs located in coastal areas or close to the border are more likely to export. Furthermore, the study also concludes that specialization economies are an important driver of small and medium-sized firms' export propensity while export spillovers are particularly relevant for micro firms. However, urbanization, measured through firms density in NUTS3 region, negatively affects firms' export propensity, which may be due to high congestion costs in the regions with a high firms density.Originality/valueThis study focus on the determinants of the decision to export or the export propensity, particularly the external factors such as the firm's location and agglomeration economies. This is a relatively neglected topic in the literature that has focused on the determinants of export intensity.