Local Product Space and Firm Level Churning in Exported Products

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Abstract

This paper explores the determinants of changes in the range of exports at the firm level with a particular interest in the role played by the local environment of the firm. It bases on the model developed by Bernard et al. (2010) and extends it to a multi-regional setting in order to account for localized externalities.

To test the model, it uses French micro-data that covers information on mono-regional firms operating primarily in manufacturing industry over the period 2002-2007. The main finding of the study is that the local product space has an impact on product-market entry and exit decisions of exporters. Firms tend to modify their mix of exported products in order to be more congruent with the core products exported by other firms in the same locality. Also, firms enjoy greater export revenues in the products that are more related to the core capabilities of the locality.

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