Import Uncertainty and Export Dynamics
A supply chain is only as strong as its weakest link. Firms are constantly managing uncertainties, including unexpected delays in the provision of a critical input that can slow down or halt the production process, possibly making the manufacturer...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/712051553538064554/Import-Uncertainty-and-Export-Dynamics http://hdl.handle.net/10986/31452 |
| Summary: | A supply chain is only as strong as its
weakest link. Firms are constantly managing uncertainties,
including unexpected delays in the provision of a critical
input that can slow down or halt the production process,
possibly making the manufacturer miss a delivery deadline.
As most exporters are also importers of intermediate goods,
supply chain unreliability related to import processing
times at the border could impact downstream export dynamics.
Exploiting a rich data set built on firm-level information
for 48 developing countries over 2006-14, this paper relies
on the Poisson pseudo-maximum likelihood estimator to
investigate how unpredictability in border clearance times
for imports affects manufacturing firms' entry, exit,
and survival in export markets. The analysis finds that
uncertainty in the time to clear imported inputs impacts
neither the entry nor the exit rate, but translates into
lower survival rates for new exporters, reducing the number
of firms that continue to serve the foreign market beyond
their first year of entry. This effect grows larger over
time, owing to rising reputational costs to input-importing
exporters, and is mainly driven by South-North trade,
possibly reflecting the time-sensitivity of buyers in
developed countries. The results also reveal heterogeneous
effects across export industries, as well as the mediating
role of sunk costs of entry in foreign markets, which
attenuate the negative effect of uncertainty on survival
rates, as firms delay exiting the export market. Most
importantly, the measure of uncertainty displays a
distinctive effect on export performance, as neither the
mean nor the median time to import impacts survival. |
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