Dynamic Strategy And Dual Margins Analysis Of Firms’ Sequential Exporting

Researches on exporting firms have been widely expanded since Melitz (2003) put forward with his firm heterogeneity theory, which includes not only the entry, survival and exit of the foreign markets but also the studies towards the new market, new firms and even new products. During this period, China is making great progress in developing new markets and plenty of interesting phenomena occurred, for example, some new exporting firms start with a little amount of export in their new markets and quit these markets in a short time, and some others break into other new markets and increase their export once they are survived. Based on firms’ dynamic expansion strategies, this paper aims to figure out the necessity of sequential exporting towards the export development of Chinese industrial firms through the researches on initial export as well as its dual margins expansion, thus can provide beneficial suggestions to both the country and each single export firm.Firstly, after the review of previous papers, we find the recent papers refer to the stable strategy theories and emphasize on the study of knowledge as well as the timing of exporting, which transfers the attention into firms’ dynamic exporting activities. However, few researchers have noticed the importance of the initial exporting activities, which will unavoidably be inadequate to distinguish the new exporters from other experienced exporters or even the later years export decisions of these firms. In fact, apart from the knowledge of firms’ own productivity as well as the economic and institutional information of the bilateral countries, there is some other knowledge which the firms can acquire only if they start to export. When firms begin their exporting activities, generally they have higher capability to get in touch with the new knowledge and more sensitive to realize their profitability, thus more swiftly when making their export decisions. This can help to explain why some firms quit shortly after their initial exporting activities and why they increase their export, expand their markets and make sequential exporting once they confirm their profitability.Furthermore, this paper uses the 2000-2006 database of Chinese Industrial Firm and Chinese Customs to analyze the specialty of Chinese industrial firms’ exporting activities, and find that the regional difference of export activities is obvious and the export dispersion is more and more distinct, the selection of first markets is inclined to emerging markets; besides, the industrial divergence is large and manufacturers are growing fast; additionally, provinces differ from each other, and the yearly changes are apparent; most importantly, the continuers are the backbones of Chinese export while single-years exporters occupy only a small part of the total amount.Hereafter this paper constructs a two-periods two markets simplex model, implies the different expectation profit objective functions and export threshold conditions brought by the dissimilar initial entry strategies, thus theoretically explains the hypothesis of sequential exporting, which is, the new exporting firms are more likely to exit from their initial markets and the survivors are easily to expand their export domain and increase their export value. To test this analysis, this paper processes the matching database of Chinese industrial firms and Chinese Customs during 2000-2006 with OLS and Logit regression (binary choices model for panel data). The results tell that industrial firms differ greatly on exporting destination selection industrial distribution and provincial distribution, which will influence the firms’ export strategies. The sequential exporting exists indeed, but the intensive and extensive fluctuation of these new export firms is effected by different factors. At the same time, these new export firms emphasize greatly on their first markets during their initial exporting with large devotion.As a conclusion, this paper comes up with suggestions on the perspectives of the government、the industry and the firms. From where the government stands, she may focus more on the completion of the infrastructure and revision of the bilateral and multi-lateral trade agreements, so that she can encourage the firms to enter into international markets; for the whole industry, the association must provides the firms with better competition environment and more essential information; form the firms’ perspective, they need to make reasonable intensive and extensive expansion decisions, and pursue the development with a dynamic eyesight. New exporters are obligated to learn market knowledge and export experience, at the same time, expand their export territory and increase their export amount once their profitability are guaranteed.