export intensities when having the countries of the Andean Community as their main trade partners, and the opposite happening if the U.S. is their main trade partner. Surprisingly, infrastructure does not matter, since none of the infrastructure variables were statistically significant.

# **2. Theory**

During the past decade, new literature began to develop introducing the microeconometrics of international trade. The increasing availability of large micro-datasets has triggered research at the firm level instead of at the country or the industry levels. These studies investigated various features of the exporting determinants and several aspects have been identified as major factors of export propensity and intensity. The main findings related to size, industry, and technology are summarized below.

# **2.1. Size**

Traditionally, most research on the determinants of export performance have focused on firm size (measured in terms of employment).<sup>1</sup> The relationship between firm size and exports has been extensively studied.<sup>2</sup> In the literature, economies of scale, higher capacity for taking risks, more opportunities to raise capital at lower costs, own marketing, R&D resources, and larger total sales have been identified as causes for a positive impact of size on export performance. Entering a foreign market may involve some level of fixed costs (even some sunk costs), which require a minimum firm size. But, beyond a point, size is not expected to influence the export behavior of firms.

According to Wagner (2001), the threshold point occurs when coordination costs cause a firm’s further expansion to be non-profitable. Most studies for both developing and developed countries found a non-linear relationship between size and exports.<sup>3</sup> Wakelin (1998) argues that this non-linear relationship may occur due to the existence of very large firms, which can be more orientated towards the domestic market as a result of, for example, domestic monopolies that give them no incentives to export.<sup>4</sup> In addition, Lefebvre and Lefebvre (2001) point out that some small firms may be very competitive in their market niches, whereas some medium firms may find it difficult to compete with large rivals occupying dominant market positions.

> 1 Few studies, such as Kumar and Siddharthan (1994), Sterlacchini (1999), and Lefebvre et al. (1999), used annual sales as a proxy for firm’s size.

> 2 See, for example, Bonaccorsi (1992), and Kumar and Siddharthan (1994).

> 3 A number of studies found an inverted U-shape relationship between size and exports. For example, Wakelin (1998), Bernard and Jensen (1999), Roper and Love (2002), Bleaney and Wakelin (2002), Cassiman and Martinez-Ros (2003), and Barrios et al. (2003) found such relationship between firm size and export propensity. Wagner (1995), Wakelin (1998), Lefebvre et al. (1998), Cassiman and Martinez-Ros (2003), and Barrios et al. (2003) found such non-linear relationship between firm size and export intensity. 4 An opposite argument is that a large domestic market with critical customers can support the development of competitive advantages, which can be exploited in foreign markets (Porter, 1990).

4