Dynamic effects of institutions on firm-level exports
(2014) In Review of World Economics 150. p.277-308- Abstract
- The gap between theoretically predicted trade patterns and actual trade suggests that our understanding of what shapes trade patterns is incomplete. Institutional barriers may be one factor behind this gap, and recent research suggests that institutions are a greater obstacle to trade than tariffs. Using detailed firm-level data, we analyze how institutional quality in recipient countries affects exports by Swedish firms. Our results suggest that weak institutions in recipient countries make exports to these countries less likely and that exports to countries with weak institutions are characterized by relatively short duration and small volume. Analyzing long-term trade flows, we identified a learning process where exporters become less... (More)
- The gap between theoretically predicted trade patterns and actual trade suggests that our understanding of what shapes trade patterns is incomplete. Institutional barriers may be one factor behind this gap, and recent research suggests that institutions are a greater obstacle to trade than tariffs. Using detailed firm-level data, we analyze how institutional quality in recipient countries affects exports by Swedish firms. Our results suggest that weak institutions in recipient countries make exports to these countries less likely and that exports to countries with weak institutions are characterized by relatively short duration and small volume. Analyzing long-term trade flows, we identified a learning process where exporters become less dependent on institutional quality in the target economy over time. More specifically, in addition to previous research that emphasize learning related to knowledge about the contracting partner and rule of law, we extend this notion and show that there is also a learning process where firms acquire knowledge about the general business climate. When learning about the contractual partner and business institutions in recipients countries takes place, exports increase relatively quickly during the first 2 years of exports and thereafter levels out. Hence, firms that are initially sensitive to weak institutions, start small, and learn how to handle foreign institutions are likely to be most successful in maintaining long-term relationships with foreign markets. (Less)
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https://lup.lub.lu.se/record/03ea7093-9d69-4f38-94a0-2e5f0da17679
- author
- Söderlund, Bengt LU and Tingvall, Patrik
- publishing date
- 2014
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- exports, institutions, firm-level data, export dynamics, F23, F55, K00, P48
- in
- Review of World Economics
- volume
- 150
- pages
- 32 pages
- publisher
- Springer
- external identifiers
-
- scopus:84939878236
- ISSN
- 1610-2878
- DOI
- 10.1007/s10290-013-0181-2
- language
- English
- LU publication?
- no
- id
- 03ea7093-9d69-4f38-94a0-2e5f0da17679
- date added to LUP
- 2021-01-13 16:21:35
- date last changed
- 2022-03-03 21:14:19
@article{03ea7093-9d69-4f38-94a0-2e5f0da17679,
abstract = {{The gap between theoretically predicted trade patterns and actual trade suggests that our understanding of what shapes trade patterns is incomplete. Institutional barriers may be one factor behind this gap, and recent research suggests that institutions are a greater obstacle to trade than tariffs. Using detailed firm-level data, we analyze how institutional quality in recipient countries affects exports by Swedish firms. Our results suggest that weak institutions in recipient countries make exports to these countries less likely and that exports to countries with weak institutions are characterized by relatively short duration and small volume. Analyzing long-term trade flows, we identified a learning process where exporters become less dependent on institutional quality in the target economy over time. More specifically, in addition to previous research that emphasize learning related to knowledge about the contracting partner and rule of law, we extend this notion and show that there is also a learning process where firms acquire knowledge about the general business climate. When learning about the contractual partner and business institutions in recipients countries takes place, exports increase relatively quickly during the first 2 years of exports and thereafter levels out. Hence, firms that are initially sensitive to weak institutions, start small, and learn how to handle foreign institutions are likely to be most successful in maintaining long-term relationships with foreign markets.}},
author = {{Söderlund, Bengt and Tingvall, Patrik}},
issn = {{1610-2878}},
keywords = {{exports; institutions; firm-level data; export dynamics; F23; F55; K00; P48}},
language = {{eng}},
pages = {{277--308}},
publisher = {{Springer}},
series = {{Review of World Economics}},
title = {{Dynamic effects of institutions on firm-level exports}},
url = {{http://dx.doi.org/10.1007/s10290-013-0181-2}},
doi = {{10.1007/s10290-013-0181-2}},
volume = {{150}},
year = {{2014}},
}