Discussion Paper Details

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Title: Testing The Core-Competency Model Of Multi-Product Exporters

Author(s): Carsten Eckel, Leonardo Iacovone, Beata Javorcik and J Peter Neary

Publication Date: January 2016

Keyword(s): core competence model, export market penetration costs, flexible manufacturing and multi-product firms

Programme Area(s): International Trade and Regional Economics

Abstract: We review the implications of the "core competence" model of multi-product firms, including the "market-size paradox": for most countries, the world market is much larger than the home market, while the costs of accessing foreign markets are relatively low; hence the model predicts that most domestic firms should export more of their core products than they sell domestically; yet, in practice, we do not observe this. Extending the model to allow for investment in export market penetration resolves the puzzle, and Mexican data confirm its predictions: in particular, only the largest firms exhibit the dominance of exports over home sales.

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Bibliographic Reference

Eckel, C, Iacovone, L, Javorcik, B and Neary, J. 2016. 'Testing The Core-Competency Model Of Multi-Product Exporters'. London, Centre for Economic Policy Research.