Overseas Market Information and Firms' Export Decisions

I. INTRODUCTION The relationship between globalization and firms' performance has been the subject of numerous studies, which have tended to find that there is a positive relationship between the two. Yet, researchers' understanding of the dynamic behavior of firms in a globalized economy is still far from sufficient to propose specific policies that help firms to grow in such an environment. For instance, micro-data analyses on various countries confirm that the international performance of a country tends to hinge on a handful of high-performing firms (Mayer and Ottaviano 2008), suggesting that increasing the number of firms involved in international activities is important for the successful internationalization of a country. However, both theoretical and empirical research to date have not produced an adequate answer to the question of how to increase the number of firms involved in international activities. For example, although there is wide empirical support for the theoretical prediction that firms with higher productivity are more likely to become exporters, a growing number of studies is producing results suggesting that productivity advantages alone do not sufficiently explain the self-selection of firms into exporting. Such studies (see, e.g., Bernard et al. 2003; Mayer and Ottaviano 2008; Todo 2011) point out that although such productivity advantages certainly do appear to exist, their impact is economically negligible. This implies that our knowledge about the determinants of the export decision remains very limited, and no conclusive answer has yet been found as to what factors are important for firms to become an exporter and grow through exporting. The extant literature has focused on a number of conditions or factors that may affect firms' export decision. One important research strand in this context concentrates on export spillovers. The idea is that information exchange with other exporting firms reduces the individual fixed costs associated with exporting, and that such information exchange therefore increases the probability that a firm will export (see, e.g., Krautheim 2012, for a theoretical analysis). The hypothesis suggests that having access to information on foreign markets substantially reduces uncertainty and encourages firms to engage in export activities. Empirical work by Koenig, Mayneris, and Poncet (2010) confirms this hypothesis by finding that the presence of other exporters has a positive effect on the export decision of other firms. Although Koenig, Mayneris, and Poncet (2010) find evidence of positive export spillovers, the evidence produced by other empirical studies on such export spillovers is at best weak (e.g., Aitken, Hanson, and Harrison 1997; Barrios, Gorg, and Strobl 2003; Bernard and Jensen 2004), which means that the search for possible channels of information spillovers continues. Against this background, this study focuses on information provided by lender banks as one potential channel of information spillovers. Most existing empirical studies examining information spillovers from other exporting firms assume that firms in the same region and/or industry are likely to exchange information with each other; however, such studies do not explicitly discuss the channel through which such information exchange takes place. The hypothesis we examine here is that lender banks work as a conduit for such information. While there are likely a variety of information channels, the reasons that we focus on the exchange of information through lender banks in particular are as follows. First, as the monitoring of borrower firms is important for banks, one would expect banks generally to accumulate information on borrower firms and related parties. Thus, if we assume that a particular bank is very knowledgeable about overseas business opportunities either through its own banking activities or transactions with client firms with experience in exporting, potential exporter firms would find it helpful to consult with such a bank. …