Job Market Paper:
Abstract: This paper examines how an exporting firm's existing network of trade partners affects its chance of entering foreign markets. To quantify the importance of existing trade partners, it introduces various centrality measures from network analysis that capture the connectivity of each country in the world trade network. High centrality countries are expected to be of ``high quality'' as they are better connected and thus more important and influential in international trade. By applying the dynamic Probit model to Colombian firm-level export data between 2007 and 2013, I show that not only the quantity but also the quality of existing trade partners matters for a firm to enter foreign markets. In particular, exporting to one more country with average centrality today increases the probability of entering a new market in the next period by 0.03%, while an instantaneous increase in the average (eigenvector) centrality of a firm's existing trade partners increases this probability by 0.78%. Importantly, the trade-promoting effects of existing trade partners increase with the number of such partners, meaning that firms with a large network of trade partners benefit the most from an increase in the quality of their networks.
- Firm-Level Export and Centrality of Destination Markets
- Does Centrality Drive Comparative Advantage?