December 1, 2011

Dutch Firms and the Emerging BRIC Countries: Evidence from Firm Transaction Level Data

The number of firms exporting to and importing from the BRIC countries is rapidly increasing between 2002 and 2008. Especially China and India stand out in this respect. This is different from trading partners with more stable markets, like the US.

Most firms trading with the BRIC countries do not survive on these foreign markets for consecutive years. This is not different from other countries of origin and destination, but entry rates are higher, so more firms survive in the markets of the BRIC countries in the end. These surviving firms will become important traders after a few years. In particular for exports to Brazil, Russia and India, new exporters dominate the trade performance of incumbents after five years. On average approximately 2.4% of all firms in the sample enter into exporting to China in a year. Regression analysis shows that the probability starting to export to China is much higher for firms with (import) experience at the Chinese market or the market in the Chinese region. The size of the firm and its export dynamics are also determinants which increase the probability to enter the Chinese market. These determinants do not differ between China and the US, although the magnitudes differ.