Why and when do firms enter and exit from foreign markets

Why do some firms export and others do not? Are exported products of higher quality, are they more expensive? What are the factors that motivate the different ways in which firms enter the foreign market? Why and when do firms exit? Finding the right answers to those questions has very practical implications for the economy of any country.

In his doctoral dissertation ‘Essays on International Trade and Foreign Direct Investment’, Ignat Stepanok at the Stockholm School of Economics, studies those topics. The aim of his models has been to incorporate the available evidence in a plausible way and to bring the existing economic theories closer to what trade and investment data shows us.

Firms’ decision to enter or exit a market is affected by trade barriers. Ignat Stepanok models exporting as a learning experience.

 − Firms invest resources in order to learn how to become exporters. Opening up a country for trade makes it a more attractive destination for foreign products.

Foreign firms invest more resources in learning how to export, which in turn increases domestic competition and firm exit. Exporting firms are on average more productive and the goods they sell are more expensive and of higher quality than those destined only for the domestic market.

Read Ignat Stepanoks doctoral thesis ‘Essays on International Trade and Foreign Direct Investment’.

For more information, please contact:
Ignat Stepanok, Stockholm School of Economics, Ignat.Stepanok@hhs.se