Study On The Relation Between Export Behavior And Profitability

In past decades, evidence from firm heterogeneity theory was a big hit, studies on the relation between export and firm performance such as productivity, size, wage was widely explored, especially the relation between export and productivity. However, as far as we are aware of, one aspect of firm performance was rarely mentioned, that is, profitability. On the other hand, relation between firm profitability and internationalization was studies for decades. Hence, in this paper, we explore the relation between export and firm profitability in terms of internationalization.We use panel data from 2002 to 2007, each year 65392 intersections, of manufacturing firms in China to explore the links between profitability and export. Based on the standard method developed by Bernard and Jensen to study the relation between productivity and export, we first use balanced panel data to calculate the export profit premier, and then test the '"Self-Selecting Effects Assumption" with stochastic dominance theory, and also test the "Learning by Exporting Effects Assumption" with a newly developed technique named generalized propensity score matching method.We came to conclusion that exporters'profit rate is 1% lower than non-exporter, and the larger share an exporter exports, the lower its profit rate is; However, firms with higher profitability did self-select into exporting market, and after their entry, profitability begin to fall, and the expected profit rate decreases with the export intensity. In terms of profitability, exporter does not benefit from exporting.Based on the conclusion we draw, the following political suggestion is made:First, from the view of macro-level, trade growth mode should transform from extensive to an intensive growth mode, from price competition to quality competition. In this way, China can transform from a big country of world trade to a strong country of world trade.Second, from micro-level, firms should export to more markets, and develop its own differentiated products. In this way, a firm can realize the balance between firm capability development and internationalization level.