Spillovers, Foreign Investment, and Export Behavior

Case studies of export behavior suggest that firms that penetrate foreign markets reduce entry costs for other potential exporters, either through learning effects or establishing commercial linkages. We examine whether spillovers associated with one firm's export activity reduce the cost of exporting for other firms. We identify two sources of spillovers: export production in general and the specific activities of multinationals. From a simple model of export behavior we derive a probit specification for the probability that a firm exports. Using panel data on Mexican manufacturing plants, we find evidence of spillovers from multinational enterprises but not from general export activity.