Financial Constraints and Firm Export Behavior

Flora Bellone (1) , Patrick Musso (1) , Lionel Nesta (2) , Stefano Schiavo (2)

1 GREDEG - Groupe de Recherche en Droit, Economie et Gestion
2 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

The paper analyzes the link between financial constraints and firm export behavior. Our main finding is that firms enjoying better financial health are more likely to become exporters. The result contrasts with the previous empirical literature which found evidence that export participation improves firm financial health, but not that export starters display any ex-ante financial advantage. On the contrary, we find that financial constraints act as a barrier to export participation. Better access to external financial resources increases the probability to start exporting and also shortens the time before firms decide to serve foreign customers. This finding has important policy implications as it suggests that, in presence of financial markets imperfections, public intervention can be called for to help eficient but financially constrained firms to overcome the sunk entry costs into export markets and expand their activities abroad.

Keywords: Financial constraints; Sunk costs; Export; Firm heterogeneity

Domains: Economics and Finance

Flora Bellone, Patrick Musso, Lionel Nesta, Stefano Schiavo. Financial Constraints and Firm Export Behavior. 2008. ⟨hal-00973114⟩