Globalization Drives Strategic Product Switching

 
Author/Editor: Moreno Badia, Marialuz ; Slootmaekers, Veerle ; Beveren, Ilke Van
 
Publication Date: October 01, 2008
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Using firm-level data for Estonia for the years 1997-2005, we analyze the impact of international competition on firm dynamics, considering both firm closedown and product switching. We contribute to the literature in two important ways: (1) this is the first paper to study the determinants of exit and product switching in an emerging market; and (2) we consider explicitly the role of export opportunities. Our results indicate that globalization does not affect firm exit significantly but it is an important factor explaining product switching. Previous studies on industrial countries have shown that product switching has been a defensive strategy against low-cost imports. In contrast, our results suggest that Estonian firms have switched products as an offensive strategy to take advantage of the export opportunities created by trade liberalization.
 
Series: Working Paper No. 08/246
Subject(s): Globalization | Estonia | Corporate sector | Commodity markets | Trade integration | Competition | International trade | Trade liberalization | Exports | Imports

Author's Keyword(s): product switching | exit | international trade | comparative advantage
 
English
Publication Date: October 01, 2008
Format: Paper
Stock No: WPIEA2008246 Pages: 44
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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