Exporting, R&D Investment and Firm Survival

This paper examines the effect of exporting on firm survival for a panel of Indian IT firms. We show that exporting has competing effects on firm survival. On the one hand, exporting and investing in productivity are complementary activities, while on the other exporting activity is an additional source of uncertainty for the firm. We show that both effects influence survival, but operate at different points in time. Specifically, the hazard facing exporters is higher than nonexporters in the initial phase following entry into the export market, reflecting the fact that exporters are particularly vulnerable to shocks in the start-up phase. However, over time, exporters benefit more from productivity gains than non-exporters and the hazard facing exporters falls below that confronting non-exporters.