Abstract:This article develops a model of heterogeneous firms that endogenously choose prices and product quality to build demand in export markets. New exporters optimally charge relatively low prices and produce low‐quality goods upon entry. Product quality, prices, and sales increase as demand grows. We structurally estimate model parameters using Chinese customs data. The estimated incentive to build future demand reduces average export prices by 0.7% and increases export sales by 4% upon entry. Endogenous demand a… Show more
“…Kugler and Verhoogen (), Hallak and Sividasan (), Fan et al. () and Rodrigue and Tan () confirmed the quality connection between intermediate inputs and final products.…”
Section: Data and Estimationmentioning
confidence: 84%
“…To alleviate the concern that the estimated coefficient on export quality was biased, we examined whether firms that exported lighters to the EU market tended to import higher quality materials after the implementation of the CR decision, since a higher quality of inputs are typically related to a higher quality of final products (Fan et al., ; Hallak & Sividasan, ; Kugler & Verhoogen, ; Rodrigue & Tan, ). Here, we checked the probability that a firm imported intermediate inputs which could produce a higher quality of final products instead of estimating the quality of imported products .…”
Section: Resultsmentioning
confidence: 99%
“…Specifically, we compared the intermediates that firms imported before and after the CR decision and identified the quality changes in intermediate inputs (e.g., cigarette lighters made by galvanising metal shell are better than those made with plastic shells). Since the quality of intermediate inputs is closely related to the quality of the final outputs (Fan, Li, & Yeaple, ; Hallak & Sividasan, ; Kugler & Verhoogen, ; Rodrigue & Tan, ), we can uncover the impact of the CR decision on firm‐level export quality through observing its impact on firm‐level import quality. Furthermore, examining firm‐level imported materials allows us to assess the influence of the CR decision on the “extensive margin” of quality upgrading .…”
This paper investigates how technical barriers to trade (TBTs) affect firm exports. The implementation of the “child‐resistance” decision (CR decision) in the EU offers an ideal quasi‐natural experiment to identify the causal effect of TBTs on firm performance. Using data on Chinese firms that exported cigarette lighters between 2004 and 2010, we show that firms exporting to the EU not only adjust their product quality to meet the requirements in the CR decision, but also upgrade their product quality in other dimensions. However, both the export value and export volume to the EU decline. At the same time, less productive exporters are forced to exit from the EU market. Lastly, heterogeneous effects of the CR decision are documented.
“…Kugler and Verhoogen (), Hallak and Sividasan (), Fan et al. () and Rodrigue and Tan () confirmed the quality connection between intermediate inputs and final products.…”
Section: Data and Estimationmentioning
confidence: 84%
“…To alleviate the concern that the estimated coefficient on export quality was biased, we examined whether firms that exported lighters to the EU market tended to import higher quality materials after the implementation of the CR decision, since a higher quality of inputs are typically related to a higher quality of final products (Fan et al., ; Hallak & Sividasan, ; Kugler & Verhoogen, ; Rodrigue & Tan, ). Here, we checked the probability that a firm imported intermediate inputs which could produce a higher quality of final products instead of estimating the quality of imported products .…”
Section: Resultsmentioning
confidence: 99%
“…Specifically, we compared the intermediates that firms imported before and after the CR decision and identified the quality changes in intermediate inputs (e.g., cigarette lighters made by galvanising metal shell are better than those made with plastic shells). Since the quality of intermediate inputs is closely related to the quality of the final outputs (Fan, Li, & Yeaple, ; Hallak & Sividasan, ; Kugler & Verhoogen, ; Rodrigue & Tan, ), we can uncover the impact of the CR decision on firm‐level export quality through observing its impact on firm‐level import quality. Furthermore, examining firm‐level imported materials allows us to assess the influence of the CR decision on the “extensive margin” of quality upgrading .…”
This paper investigates how technical barriers to trade (TBTs) affect firm exports. The implementation of the “child‐resistance” decision (CR decision) in the EU offers an ideal quasi‐natural experiment to identify the causal effect of TBTs on firm performance. Using data on Chinese firms that exported cigarette lighters between 2004 and 2010, we show that firms exporting to the EU not only adjust their product quality to meet the requirements in the CR decision, but also upgrade their product quality in other dimensions. However, both the export value and export volume to the EU decline. At the same time, less productive exporters are forced to exit from the EU market. Lastly, heterogeneous effects of the CR decision are documented.
“…3 Piveteau (2016) and Rodrigue and Tan (2019) both document that in order to build brand reputation (demand stock), firms have a strong incentive to lower their current price to increase sales, which will grow their reputation (future demand stock). 4 Tan (2019) develops a model to capture the cross-market demand spillovers, in which conditioning on other firms' strategy, a firm that enters more markets (more sales) will have higher sales in a new market.…”
Section: Introductionmentioning
confidence: 99%
“… Piveteau () and Rodrigue and Tan () both document that in order to build brand reputation (demand stock), firms have a strong incentive to lower their current price to increase sales, which will grow their reputation (future demand stock). …”
In this paper, we investigate the influence of market rivalry on firm‐level exchange rate pass‐through. Similar to Bloom et al. Econometrica, 80, 1347–1393 (2013), we define market rivalry as product market proximity, and expect the cross market spillovers, that is, through leaked information or reputation, to affect firm‐level export price. Using a comprehensive dataset from Chinese exporters for the 2000–2007 period, we find that in response to a higher degree of market rivalry firms are less responsive to exchange fluctuations. This unresponsiveness suggests a higher degree of exchange rate pass‐through. The influence of market rivalry is stronger among firms that export consumption and heterogeneous products, and to developed countries. Our results are robust to different measures of market rivalry and specifications.
This paper aims to study the performance implications of sustainable product attributes (SPA) of US manufacturing firms. Specifically, it analyzes the influence of aggregate and disaggregated SPA on firm profitability. The study further explores the moderating influence of marketing resource intensity on aggregate and disaggregated SPA and firm profitability relationships. The fixed‐effect regression analysis of 433 US manufacturing firms' panel dataset reveals that aggregate and disaggregated SPA positively influence the firm profitability. The moderation analysis also confirms the positive influence of marketing resource intensity on aggregate and disaggregated SPA and firm profitability relationship. The current paper contributes to the triple‐bottom‐line and theory‐of‐the‐firm literature streams by empirically studying the influence of aggregate and disaggregated SPA on firm profitability. Furthermore, this study uses the resource‐based view to complement theory‐of‐the‐firm model of SPA and empirically study the moderating role of marketing resource intensity between aggregate and disaggregated SPA and firm profitability. Finally, the findings inform the managers of the increased firm profitability by aggregate and disaggregated SPA, and the pivotal role of marketing resource intensity in strengthening the positive influence of aggregate and disaggregated SPA on US manufacturing firms' profitability.
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