Local product space and firm-level churning in exported products

Abstract

Abstract This article explores the determinants of changes to the range of exports at the firm level with a focus on the role played by the firm’s local environment. It extends the model developed by Bernard et al. (2010) to a multiregional setting to account for localized externalities. The model is tested using French micro-data on monoregional manufacturing firms covering the period 2002–2007. Our main finding is that the local product space has an impact on exporters’ product-market entry and exit decisions. Firms tend to modify their exported product mix to achieve congruence with the core products of the locality. Also, firms receive higher revenue from the export of products that are more related to the core capabilities of the locality.

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