# 1 Introduction

Surviving in the export market is not just about entering into, but also about not exiting from foreign markets. The rapidly growing literature on international trade at the level of individual ...rms has mainly focused on the role of ...xed costs and ...rms’ characteristics–productivity and ...nancial constraints–on exporting status (Melitz, 2003, Eaton et al., 2004; Bernard and Jensen, 2004; Chaney, 2005; Manova, 2008, Eaton et al., 2009). Yet, empirical evidence on the relevance of these determinants on ...rms’ability to sustain once they entered is rather scarce. This is surprising given that sustained trade relationships are the driving force of ...rms’export performances and subsequent economic growth (Besedes and Prusa, 2006a; Brenton and Newfarmer, 2007; Brenton et al., 2009). In countries as di¤erent as Columbia or China, higher export performances are to be expected from the securing (survival) and deepening of existing trade ‡ows rather than the creation of new ones (Eaton et al., 2008; Manova and Zhang, 2009).

In this paper we try to ...ll this void of the literature and investigate the role of ...nancial development in promoting export survival of agri-food exports sensitive to food safety regulations of destination markets. The focus on the agri-food sector is dictated by the availability of a measure of ...nancing needs at the product level. We rely on a measure of product sanitary risk developed by Jaud et al., (2009a). Additionally, the agri-food sector is particularly relevant to developing countries. International trade in high-value food products–including fresh and processed fruits and vegetables, ...sh, live animals and meat, nuts, and spices–from developing countries has expanded enormously over the last two decades o¤ering opportunities for development. However, trade in agrifood is governed by a growing array of standards. Evolving Sanitary and Phytosanitary Standards (SPS) and technical regulations as well as changes in importers’supply chain requirements impose additional sunk, ...xed and operating costs along the ...rms’export life. These costs may not only a¤ect the decision of ...rms to start exporting but also a¤ect survival of the ...rms “pricing out” producers that cannot comply with the SPS regulations.

The existence of these costs suggests a potential role of credit constraints in shaping the duration of trade relationships on foreign markets. Well-developed ...nancial markets by facilitating ...rms’ access to ...nance would allow them to survive demand shocks in foreign markets and maintain long-standing trade relationships. The more so for products with higher ...nancing needs. We empirically test this prediction by examining the export survival of di¤erent agri-food products from ...rms operating in ...ve African countries to the world. We build on the seminal work of Rajan and Zingales (1998) and use a di¤erence in di¤erences approach. To capture the di¤erentiated e¤ect of ...nancial development across industries, they interact the country level of ...nancial development with the industry level of external ...nance dependence and control for industry and country ...xed e¤ects. The measure of external ...nance dependence is computed using US ...rm level data and re‡ects the industry technological demand for external ...nance.

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