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Organizational learning begins with experience. However, it remains an open question whether firms learn from a particular type of experience: exporting. This study aims to speak into this debate by examining when learning by exporting occurs. Our core thesis is that the timing of learning by exporting depends on a firm’s home market economic development. Drawing on classic theories of organizational learning, we posit that firms in more developed home markets will enjoy greater opportunities for learning before exporting whereas firms in less developed home markets will enjoy greater opportunities for learning after exporting. The former will be observed as a divergence in productivity among firms from different home markets, whereas the latter will be observed as convergence over time. The proposed hypotheses were tested and supported using longitudinal data from the World Bank Enterprise Survey. A range of theoretical and practical contributions are discussed. Plain English Summary When do firms learn by exporting? Analysis of data from the World Bank suggests that the answer depends on a firm’s home market. Firms from more developed economies seem to learn before exporting whereas firms from less developed economies seem to learn after exporting. We argue that these differences in learning rates occur because firms in more developed countries are able to access more advanced knowledge and technology domestically in preparation for entering foreign markets whereas firms in less developed countries are only able to access such knowledge by serving foreign markets. The analysis conducted on longitudinal data from the World Bank corroborates our arguments and has important implications for firms and society in general. Importantly, it suggests that exporting may be one avenue through which firms are able to level the playing field in the global competitive landscape.

Prior research suggests that firm productivity and export activity are mutually reinforcing. Highly productive firms are more likely to enter the export market (i.e., self-selection), and upon doing so, achieve greater productivity levels over time (i.e., learning-by-exporting). We consider how a critical yet unexamined, factor impacts this relationship: the economic development of a firm’s home market. Drawing on institution-based theories, we hypothesize that self-selection effects will be strongest among firms in more developed economies. Drawing on knowledge-based theories, we hypothesize that learning-by-exporting effects will be strongest among firms in less developed economies. Taken together, we posit that firm productivity and export activity indeed reinforce one another; however, the strength of each direction of the relationship will be amplified, at least in part, by the presence of the opposite home-market economic conditions. Analysis of longitudinal data from the World Bank Enterprise Surveys composed of responses from 3431 manufacturing firms across 63 countries from 2006 to 2017 supports the proposed hypotheses.

Agrowing literature suggests that high-income countries export high-quality goods.Two hypotheses may explain such specialization, with different implications for welfare, inequality, and trade policy. Fajgelbaum et al. formalize the Linder hypothesis that home demand determines the pattern of specialization and, therefore, predict that high-income locations export high-quality products. The factor-proportions model also predicts that skill-abundant, high-income locations export skill-intensive, high-quality products. Prior empirical evidence does not separate these explanations. I develop a model that nests both hypotheses and employ microdata on U.S. manufacturing plants’ shipments and factor inputs to quantify the two mechanisms’ roles in quality specialization across U.S. cities. Home-market demand explains as much of the relationship between income and quality as differences in factor usage.

This paper studies the evolution of trade freeness and of the agglomeration of production, and their relationship at the sectoral level in a selected group of EU countries. Our main objectives are the search for stylized facts about their relationship and to check how our findings relate to the theoretical prediction about it in case of the home market effect. Our sectoral focus requires an original testing approach based on the combination of different bootstrap distributions. The results discussed show that a systematic relationship between trade freeness and agglomeration does not emerge at the sectoral level, this is true also for those sectors which support the home market effect hypothesis.

'Investor Protection and Corporate Governance' analyzes the impact of corporate governance on firm performance and valuation. Using unique datasets gathered at the firm-level—the first such data in the region—and results from a homogeneous corporate governance questionnaire, the book examines corporate governance characteristics, ownership structures, dividend policies, and performance measures. The book's analysis reveals the very high levels of ownership and voting rights concentrations and monolithic governance structures in the largest samples of Latin American companies up to now, and new data emphasize the importance of specific characteristics of the investor protection regimes in several Latin American countries. By and large, those firms with better governance measures across several dimensions are granted higher valuations and thus lower cost of capital. This title will be useful to researchers, policy makers, government officials, and other professionals involved in corporate governance, economic policy, and business finance, law, and management.

Endogenous demand composition across sectors due to income elasticity differences, or Engel's Law for brevity, affects (i) sectoral compositions in employment and in value-added, (ii) variations in innovation rates and in productivity change across sectors, (iii) intersectoral patterns of trade across countries, and (iv) product cycles from rich to poor countries. Using a two-country model of directed technical change with a continuum of sectors under nonhomothetic preferences, which is rich enough to capture all these effects as well as their interactions, this paper offers a unifying perspective on how economic growth and globalization affect the patterns of structural change, innovation, and trade across countries and across sectors in the presence of Engel's Law. Among the main messages is that globalization amplifies, instead of reducing, the power of endogenous domestic demand composition differences as a driver of structural change.

Developing a two-country oligopoly model with firm heterogeneity, this paper examines the relationship among market size, the Home Market Effect, and the gravity equation. We show that in the long-run with free entry, the Home Market Effect holds, namely, more firms locate in the large-sized country. This leads the large-sized country to be a net exporter of the oligopoly good. In the short-run with restricted entry, the Home Market Effect no longer holds and the large-sized country becomes a net importer of the oligopoly good. These results suggest that the theoretical predictions of Feenstra et al. (Can J Econ 34(2):430–447, 2001) survive firm heterogeneity.

Purpose This paper aims to explore the underlying reasons for business model change among internationalizing SMEs and illustrate how home market context affects that change. Design/methodology/approach This is a comparative case study of two companies with similar backgrounds from different countries of origin. In each case, the data were collected by means of in-depth interviews with key informants. For its theoretical background, the study draws on the business model innovation and international business literature. Findings The authors found that home market context has two kinds of effect on business model change in internationalizing SMEs. First, home market maturity has a strong effect on the timing of companies’ internationalization efforts. Second, the company’s home market can either be used to strengthen the value proposition or may be disguised, depending on how the country of origin is seen in international markets. This factor has a strong influence on how SMEs change their business model when internationalizing. Research limitations/implications The study’s limitations relate to its qualitative and exploratory nature. Future research should further assess the generalizability of these findings across different cultural contexts and countries of origin by quantifying the central concepts and examining how they relate to larger-scale cross-national and cross-sectional panel data. Practical implications As internationalization increasingly poses both threats and opportunities, companies must be able to experiment with business models when necessary to adapt to the host market. In so doing, it is also important to consider how a company’s home market affects business model change. Originality/value This is one of the first studies to illustrate how the process of internationalization drives SMEs to change their business models. As such, the paper enhances existing understanding of business model change in the context of internationalization. To our knowledge, no previous study has described these dynamics in a comparative context that takes account of SME country of origin.

A Melitz-style model of monopolistic competition with heterogeneous firms is integrated into a simple new economic geography model to show that the standard assumption of identical firms is neither necessary nor innocuous. We show that relocating to the big region is most attractive for the most productive firms; this implies interesting results for empirical work and policy analysis. A 'selection effect' means standard empirical measures overestimate agglomeration economies. A 'sorting effect' means that a regional policy induces the highest productivity firms to move to the core and the lowest productivity firms to the periphery. We also show that heterogeneity dampens the home market effect.

We analyze multimarket interactions between firms that allocate limited budgets in value creation and in competitive activities. We analyze multimarket interactions between firms that must invest limited budgets in value (surplus) creation and in competitive rent-seeking activities. Firms are horizontally differentiated on a line segment and compete for multiple markets and prizes that differ in the relative effectiveness of each firm’s competitive rent-seeking spending. Each firm faces a dual trade-off: First, they must choose how much to invest in value creation versus how much to spend in rent-seeking competition. Second, they must decide on how to allocate resources across the different markets. When the market values are exogenous (and identical across markets), the intensity of competition is highest for the market in the middle, rather than in (advantaged) markets that are close or in (disadvantaged) markets that are closer to the rival. Counter to what one would expect, greater firm differentiation actually intensifies the competition in the middle markets. When firms endogenously invest in value creation, they invest more in value creation in closer markets and the investments decline toward the middle. This results in the most intense competition moving away from the middle to a market in each firm’s turf. The analysis also provides a competitive perspective on the home-turf bias phenomenon.