In this paper, we examine the survival capacity of trade relationships in cross‐border production chains. Our main contribution is to show that there are differences in the probability of export interruption between intermediate and final stages along the global value chain, finding a lower sensitivity of intermediate goods to the increasing competition from lower‐income countries. In addition, the paper also makes a methodological contribution by using time‐discrete duration models with product‐country random effects to control for unobservable heterogeneity and by including interactions in the model, in order to identify the sources of these differences. Our estimates show that variables such as EU membership, export experience, product and market diversification, initial trade value, destination market size, geographical proximity and economic proximity reduce the likelihood of export failure more for intermediate than for final goods, being the differential impact particularly higher for the two first variables. These results would suggest that factors that reduce uncertainty and search costs and increase trust and reliability among production partners are particularly relevant for intermediate stages, fostering the probability of remaining an active member of global production chains.
The aim of this paper is to investigate whether the probability of ceasing to export is lower for firms that simultaneously import intermediate inputs and export (vertically specialized firms à la Hummels et al., The nature and growth of vertical specialization in world trade, 2001), once other firm characteristics are controlled for. On the basis of the estimation of a random-effects probit model with panel data, the authors find that the superior characteristics of these types of two-way trading firms (in terms of size, productivity, foreign ownership and skilled labor) explain their greater resistance to losing their status as exporters. However, even when these distinctive traits are controlled for, the effect of sourcing inputs from abroad on export exit is significantly different for large and small firms, playing a role in continuing to export only for the latter. Thus, it seems that small firms which are both importers of intermediates and exporters have an added advantage which enables them to confront the uncertainty of foreign markets in better conditions and translates to a lower likelihood that they will stop exporting.
Purpose Drawing on the literature that has shown the prevalence of short-lived trade relationships, the purpose of this paper is to provide further understanding about this issue by exploring the impact of engaging in Global Value Chains (GVCs) on the chance of export survival at product-country level, paying special attention to the differences between advanced and developing countries. The authors also investigate whether the type of GVC participation (backward or forward) matters for export survival. Design/methodology/approach To capture to what extent a country’s exports are integrated in GVCs, the authors use the OECD Inter-Country Input-Output database to estimate value added incorporated in exports. Through the estimation of a discrete-time duration model, the authors explore the impact of engaging in GVCs on export survival using highly disaggregated trade data from the CEPII’s BACI database. Findings The findings endorse the hypothesis that deeper participation in GVCs is a key factor in explaining stability in trade relationships, mainly for developing countries where the trade flows are especially fragile. The authors also find different effects depending on the type of GVC involvement and on whether the value chain partners are advanced or developing. Originality/value The paper contributes to the literature by extending the understanding on the factors that promote the stability of exports, including among them, involvement on GVCs (and its forms) which is one of the most relevant factors to explain recent behavior of trade.
Drawing on the literature that has shown the prevalence of short-lived trade relationships, the aim of this paper is to provide further understanding about this issue by exploring the impact of engaging in Global Value Chains (GVCs) on the chance of export survival at product-country level. We also investigate whether the type of GVC participation (backward or forward) matters for export survival. Furthermore, we consider the level of development of countries with which GVC linkages are established. Our findings endorse the hypothesis that deeper participation in GVCs is a key factor in explaining stability in trade relationships, mainly for developing countries where the trade flows are especially fragile. We also find different effects depending on the type of GVC involvement and on whether the value chain partners are advanced or developing.
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