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Beyond Trade Costs: Firms' Endogenous Access to International Markets

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  • Garcia Pires, Armando José
Abstract
Contrary to what has been standard in the international trade literature, we argue that firms' access to international markets should not be just reduced to exogenous factors such as trade costs. Instead, we defend that market access can also be endogenous, since firms can affect international trade patterns by acting strategically against rivals. In particular, we endogenize firms' competitiveness through commitment power advantages of R&D. In this setting we show that: (1) higher efficiency of R&D (like low trade costs) makes trade more easy (given that R&D increases the profitability of exports); (2) firms with higher commitment power in R&D are more competitive (since they have larger incentives to innovate) and as a result these firms also have better access to export markets.

Suggested Citation

  • Garcia Pires, Armando José, 2006. "Beyond Trade Costs: Firms' Endogenous Access to International Markets," CEPR Discussion Papers 5980, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5980
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    More about this item

    Keywords

    R&d investment; Commitment power; Endogenous asymmetric firms; Market access;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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