Supply chains and the internationalization of small firms
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This paper explores the relation between supply-chain participation and the internationalization of firms. We show that even small and less productive firms, if involved in production chains, can take advantage of reduced costs of entry and economies of scale that enhance their probability of exporting. The empirical analysis is carried out on an original database, obtained by merging and matching balance-sheet data with data from a survey on over 25,000 Italian firms, which include direct information on the involvement in supply chains. We find a positive and significant relation between being part of a supply chain and the probability of exporting, as well as the intensive margin of trade. The number of foreign markets served (the extensive margin), on the other hand, does not seem to be affected. We also investigate whether being in different positions along the chain, i.e., upstream or downstream, matters, and we find that downstream producers tend to benefit more. Our results are robust to different specifications, estimation methods, and the inclusion of the control variables typically used in heterogeneous firms models.
KeywordsSupply chains Global value chains Internationalization Small and medium enterprises Heterogeneous firms
JEL ClassificationsF12 F14 F21 L26
We would like to thank two anonymous referees, Tadashi Ito and the participants to the Royal Economics Society Conference (Manchester, April 7–9, 2014); the Italian Trade Study Group Conference (November 2013); the 15th European Trade Study Group Conference (September 2013); the 10th c.Met05 Workshop (July 2013) and seminars at University of Florence, and IDE-JETRO for their comments on previous drafts of the paper. Financial support from the Regione Sardegna for the project CIREM “Analysis of competitiveness of Sardinia’s production system” is gratefully acknowledged.
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