Stability through value chains? Role of participation in production networks participation in export duration
There is growing empirical evidence on the short duration of export spells at both the product and firm level. While the empirical studies attributed export duration mostly to diversification, export market heterogeneity and information networks, this paper also looks at the effect participation in production networks has on different dimensions of exporting longevity. Despite the widely accepted view that there is a strong correlation between export and FDI patterns, to our knowledge the role of FDI on the persistence of export product destination mix has not yet been explored. In this paper we explicitly focus on FDI as a determinant of export spell duration, by controlling for the role played by both inward and outward FDI in the duration of export spells covering all extensive margins of exporting. We use transaction level data on the population of firms in Slovenia (2002 2011) matched with detailed information of origin/direction of inward/outward FDI and firm balance sheets. Our results indicate that bilateral FDI flows with the export destination country have a strong positive effect on the duration of a firms exporting presence in that market as well as on the duration of related product market spells. Additionally, there are pronounced market and product related trade complementarities as either exporting or importing experience with the relevant market/product substantially improves the chances of an export spell continuing. Finally, we find convincing if indirect evidence that participation in production networks greatly improves exporting survival at the product destination level.