Regional Product Relatedness And Firm Exports Diversification

This paper explores the determinants of the diversity of exports at the firm level with a particular interest in the role played by the regional product relatedness.To this aim,this paper introduces a multiregional setting to the BRS theoretical framework proposed by Bernard et al.(2010),which explains the diversity of product exports.As a measure of product relatedness,this paper constructs a regional relatedness index(RRI)based on the proximity index proposed by Hidalgo et al.(2007).This paper tests the theoretical framework and related hypotheses using the firm-level data of China Industrial Enterprise Database from 1998 to 2010.The main finding of this paper is that regional product space has a significant impact on the export diversification level of new products.Specifically,firms can promote the diversification of export products by learning and accumulating the required capabilities of regional product sets and jumping to new products with greater product relatedness.This study also shows that both R&D and learning effect can improve the utilization of regional relatedness of products to strengthen the impact of regional related effects on the export diversification level of firms,and this impact varies at firm heterogeneity in the level of ownership type and geographical location.Private enterprises are more localized and their export diversity is more dependent on the regional relatedness of products.The state-owned enterprisesutilization efficiency of local product relatedness is relatively low because of their more independent industrial chains,the regional relatedness effect in Hong Kong,Maucao,Taiwan and foreign countries is not significant while the foreign firms rely mainly on their strong parent company.Peripheral areas are more dependent on regional routes for their export diversification than the core areas because of limited knowledge exchanges and cooperation across regions.