Chinese Firms’ Entry to export Markets: The Role of Foreign Export Spillovers”, World Bank Econ Rev April 19

The effect of the proximity to multinational exporters on the creation of new export linkages (extensive margin of trade) is debated. Using panel data from Chinese customs for the period 1997-2007, Chinese domestic firms ’ capacity to start exporting new varieties to new markets is shown to positively respond to the export activity of neighboring foreign firms. These spillovers are shown to be product and country specific. This conclusion is robust to fixed effects and instrumental variables specifications that control for both supply and demand shocks that could bias the estimations. The impact is sizable. The marginal impact of product-country specific foreign export spillovers is five times as large as the effect of a 10 % increase in the demand for the product in the destination country. Foreign export spillovers are also shown to be mainly limited to ordinary trade activities. Overall, our findings suggest that, even for a country with important cost-advantage like China, there is space for policy-makers ’ initiatives favoring the diffusion among exporters of best practices regarding export experience. JEL classification: F1, R12, L25