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New exports from emerging markets: do followers benefit from pioneers ?

Wagner, Rodrigo and Zahler, Andrés (2011): New exports from emerging markets: do followers benefit from pioneers ?

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Abstract

Since Arrow (1962), spillovers from pioneer to follower in non-excludable innovations are central to our understanding of endogenous economic growth. Nonetheless, evidence of these spillovers in less-developed economies has been elusive. Our paper contributes by showing novel facts consistent with externalities in new export products. To avoid biases towards ex-post successes, we use data on the universe of customs transactions from Chile (1990- 2006). We find that, first, follower firms are more likely to enter a product if the pioneer firm survives exporting. More importantly, we also find that pioneers enter and remain smaller than followers, which is indicative that the first exporter may not be the firm that benets the most from the discovery. This fact is inconsistent with the currently standard view in international trade, in which the largest firm would be the first willing to pay a homogeneous sunk cost of exporting. In contrast, our facts are consistent with the view that smaller pioneer exporters are data producers, whose spillovers benet larger followers. We offer a simple model to formalize this intuition, based on the idea that large exporters have more choices on how to allocate their managerial capacity. This real option makes large exporters wait, as to assign their marginal manager on the best possible project. In contrast, smaller and more focused firms prefer to be pioneers.

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