Globalization drives strategic product switching

Using firm-level panel data for Estonia, we analyse the impact of international competition on firm dynamics, considering both firm closedown and product switches. We contribute to the literature in two important ways: first, this is the first paper to study the determinants of exit and product swit...

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Bibliographic Details
Published in:Review of world economics 2012-04, Vol.148 (1), p.45-72
Main Authors: Miranda, Veerle, Badia, Marialuz Moreno, Van Beveren, Ilke
Format: Article
Language:English
Subjects:
Agreements
Alliances
Analysis
Business management
Business structures
Comparative advantage
Competition
Costs
Developing countries
Economic Policy
Economic theory
Economics
Economics and Finance
Economics, International
Emerging markets
Estonia
Estonians
European Integration
Exports
Extractive industries
Global economy
Globalization
Imports
Industrial market
Industrial products
International Economics
International trade
Macroeconomics/Monetary Economics//Financial Economics
Market entry
Original Paper
Product development
Product differentiation
Product lines
Product markets
Product mixes
Productivity
Strategic planning
Studies
Trade liberalization
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Summary:Using firm-level panel data for Estonia, we analyse the impact of international competition on firm dynamics, considering both firm closedown and product switches. We contribute to the literature in two important ways: first, this is the first paper to study the determinants of exit and product switching in an emerging market; and second, we consider explicitly the role of export opportunities. Our results indicate that globalization does not affect firm exit significantly but it is an important factor explaining why firms choose a different core product. Previous studies on industrial countries have shown that product switching has been a defensive strategy against low-cost imports. In contrast, our results suggest that Estonian firms change their core products as an offensive strategy to take advantage of the export opportunities created by a globalized economy.
ISSN:1610-2878
1610-2886
DOI:10.1007/s10290-011-0114-x