Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 326: Do Foreign Contacts Enable Firms to Become Exporters?

Fredrik Sjöholm ()
Additional contact information
Fredrik Sjöholm: The European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: The pattern of trade between nations is well understood, but much less is known about firm level determinants to export: why do some firms start to export while others continue to produce for the domestic market? One reason for different firm strategies could be that the fixed costs for export differs between firms. This paper examines if foreign contacts decrease export-costs and thereby have a positive impact on the export propensity. More specifically, are establishments which have large degrees of foreign contacts relatively likely to become exporters? Three different types of foreign contacts are examined: foreign ownership, import, and regional presence of Foreign Direct Investment. The study is conducted using Indonesian establishment data covering all manufacturing establishments with more than 20 employees.

Keywords: Export; sunk costs; foreign contacts; establishment data; Indonesia

JEL-codes: F10; F23; L10

26 pages, June 22, 1999

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