Discussion paper

DP11049 Testing The Core-Competency Model Of Multi-Product Exporters

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.


Neary, P, B Javorcik, C Eckel and L Iacovone (2016), ‘DP11049 Testing The Core-Competency Model Of Multi-Product Exporters‘, CEPR Discussion Paper No. 11049. CEPR Press, Paris & London. https://cepr.org/publications/dp11049