Globalization Drives Strategic Product Switching

By Marialuz Moreno Badia, Veerle Slootmaekers, Ilke Van Beveren

October 1, 2008

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Format: Chicago

Marialuz Moreno Badia, Veerle Slootmaekers, and Ilke Van Beveren. Globalization Drives Strategic Product Switching, (USA: International Monetary Fund, 2008) accessed November 21, 2024

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.

Subject: Commodity markets, Competition, Economic sectors, Exports, Financial markets, Imports, International trade, Manufacturing

Keywords: A number of firm, Commodity markets, Comparative advantage, Competition, Determinants of firm dynamics, Export opportunity, Exports, Firm decision, Firm level, Four-Digit product, Global, Imports, Manufacturing, Product switching, Sector distribution, Sunk cost, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/246
Stock No:

WPIEA2008246
ISBN:

9781451871043
ISSN:

1018-5941

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