Follow thy neighbor: The role of first exporters

Abstract

Exporting to foreign markets offers new opportunities for growth and expansion, but also comes with inherent challenges and risks. To mitigate these uncertainties, firms often learn from neighboring firms that are geographically close (Koenig et al. 2010; Silvente and Giménez 2007). Accounting for endogenous sorting of firms across space within cities, we present novel evidence of export spillovers at finely detailed spatial scales. Our findings suggest that firms located in the immediate vicinity of a local first exporter – a firm initiating a new seller-market – are 38% more likely to enter the same market the following year, compared to firms that lack a nearby first exporter. This effect is twice as large as export spillovers from later exporters in the same area. Our mechanism analysis suggests that the spillover effect is likely driven by the flow of information, facilitated by close proximity.