Local Advantage in a Global Context
New Horizons in Regional Science series
Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough
Chapter 13: Firm Performance and International Trade – Evidence from a Small Open Economy
Martin Andersson, Sara Johansson and Hans Lööf Despite a growing interest in firm-level analyses of international trade from both theorists and empiricists, papers providing thorough analyses of firms’ trading activities and their relation to firm performance are rare. The literature is dominated by stylized facts from the USA, a large country with a significant share of the world market. This chapter resolves this imbalance and presents a comprehensive analysis of Swedish firms’ trade. Sweden is a small open economy with a limited domestic market. Its neighbour countries have similar traits (language, culture, formal and informal institutions) and Swedish firms presumably face low entry costs not only to the rest of Scandinavia but also the Baltic countries. Sweden thus constitutes an interesting case. The chapter makes a twofold contribution: (1) based on detailed data on Swedish firms over a sequence of periods, we present stylized facts about their engagement in international trade and contrast them to findings from other countries, the USA in particular. Our data cover information on both export and import activities across products and markets for each and every firm, such that we can provide a complete picture of the firms’ international trading activities and their variation across products and markets; (2) we extend previous analyses by examining the elasticity of productivity with respect to both export and import activities, respectively. Moreover, we perform static panel estimations (ordinary fixed effects) and dynamic estimations using the Arellano–Bond estimation procedure. We find evidence of both ‘learning by exporting’...
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