Working Paper: NBER ID: w16947
Authors: Alejandro Artopoulos; Daniel Friel; Juan Carlos Hallak
Abstract: Several developing countries feature weak performances as exporters of differentiated goods to developed countries. This paper builds a conceptual framework to explain the obstacles that prevent producers of differentiated products from establishing a consistent presence in the developed world and the process through which those obstacles may be overcome. We build our framework based on case studies of export emergence in four Argentine industries: motorboats, television programs, wines, and wooden furniture. We find that exporting consistently to developed countries requires drastic changes in how business is conceived and conducted relative to the practices that prevail among domestically-oriented firms. Attempts by these firms to export often do not succeed because they approach foreign markets the same way that they approach the domestic one. Their failure to change the business approach stems from their inability to access critical (tacit) knowledge about differences in consumption patterns and business practices in developed countries. In three of the sectors we study, an export pioneer is the first to implement the necessary changes to established practices. His actions set a benchmark, unleashing a diffusion process that fosters export emergence in the sector. The most salient feature of export pioneers is their knowledge advantage about foreign markets stemming from their embeddedness in the business community of their industry in a developed country.
Keywords: Exporting; Differentiated Goods; Developing Countries; Business Model; Tacit Knowledge
JEL Codes: F10; F14; M13; M16; O14; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| success of export pioneers in adapting to foreign markets (F10) | diffusion of knowledge and practices (O36) |
| diffusion of knowledge and practices (O36) | enhancement of export emergence in sectors (F14) |
| firms attempting to export must implement drastic changes in business operations (F10) | consistent exports to developed countries (F10) |
| lack of access to critical tacit knowledge about foreign consumption patterns (F61) | barrier to export success (F14) |
| knowledge advantage of export pioneers (F10) | ability to adapt operations and products to meet higher quality and design standards (L15) |
| actions of export pioneers (F10) | benchmark that facilitates diffusion process (O33) |
| presence of export pioneer (F10) | sustained export growth in a sector (F10) |
| challenges of understanding foreign market demands (F23) | limiting export potential among domestic producers (F14) |