The Role of Small and Medium-Size Firms in Countries’ Export Growth
Small and Medium Enterprises (SMEs) can substantially contribute to a country’s long-term export growth and diversification. And trade promotion organizations can play an important role in the process. We have found this after analyzing the export performance of developing countries by using transaction-level data of all Peruvian exports between 1994 and 2019, a quarter of a century.
Think of short films and movies. Export superstars are the leading actors in developing countries’ export “short films.” They account for a significant fraction of their total foreign sales in the short to medium run. According to existing studies, the five largest firms were found to be responsible for about one-third of aggregate exports, almost half of export growth, and a third of growth due to diversification over five years periods.
And then there are “full movies” and the supporting roles. In developing countries, less is known about the contribution of different kinds of firms in export “full movies.” Thus, the movie’s plot —and this blog— involves finding out the origin and dynamics of long-run export growth, to what extent initially small firms contribute to this growth, and whether and how trade policy helps them become superstars.
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