publication

The role of firm-to-firm relationships in exporter dynamics

Authors:
Davide RIGO
2021

This paper investigates the role of firm-to-firm relationships in export market dynamics. First, I provide evidence that exporters grow in a foreign market by accumulating their customer base. Second, I show that the customer base can explain up to 30% of the growth in a destination market. Third, I explore potential mechanisms and find that exporters reduce their prices to expand existing firm-to-firm relationships. Fourth, I study how firm-to-firm relationships adjust in response to changes in market access by exploiting the trade policy uncertainty associated with the renegotiation of the UK-EU trade relationship and the depreciation of Sterling following the Brexit referendum. I find that French exporters with long-lasting relationships in the UK are less affected by the referendum shock and exhibit higher exchange rate pass-through. Overall, my results indicate that the customer base is a crucial margin for export market growth and for evaluating firms' heterogeneous responses to changing market conditions.