Export spillover and location choice

This paper investigates how export spillovers influence firms' entry of new destinations. We study four types of city-destination-specific export spillovers: domestic, foreign, inter- and intra-industry spillovers. Using a matched dataset of China's firm level trade and survey data over the period of 2000 to 2006, we run conditional logit model and conclude that neighbor's export activities significantly matter for a firm's entry to new markets. In particular, we find: (1) The probability of local exporters entering a particular destination responds positively to neighboring exporters; (2) Intra-industry spillovers are stronger than inter-industry spillovers; (3) For both intra- and inter-industry, domestic firms generate stronger spillovers than their multinational counterparts; (4) More productive firms rely less on export spillovers when entering less favored destinations; and (5) Ordinary trade activities facilitate stronger spillovers than processing trade regime. These findings remain robust after we control for demand side and supply side shocks.