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Globalization Drives Strategic Product Switching
Author:
Ms. Marialuz Moreno Badia
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Veerle Slootmaekersnull

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Ilke Van Beverennull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 246
Language:
English
Publication Date:
01 Oct 2008
DOI:
https://doi.org/10.5089/9781451871043.001
ISBN:
9781451871043
ISSN:
1018-5941
Pages:
44
Keywords:
WP; firm level; sunk cost; a number of firm; comparative advantage; firm decision; product switching; Four-Digit product; export opportunity; determinants of firm dynamics; sector distribution; Exports; Commodity markets; Imports; Competition; Manufacturing; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Using firm-level data for Estonia for the years 1997-2005, we analyze the impact of international competition on firm dynamics, considering both firm closedown and product switching. We contribute to the literature in two important ways: (1) this is the first paper to study the determinants of exit and product switching in an emerging market; and (2) 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 product switching. 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 have switched products as an offensive strategy to take advantage of the export opportunities created by trade liberalization.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2008: Issue 246