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Differential Impact of Uncertainty on Exporting Decision in Risk-averse and Risk-taking Firms: Evidence from Korean Firms

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Authors
Kim, Haeng-Sun
Issue Date
2016-08-07
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.29 No.3, pp. 379-409
Keywords
ExportsRisk aversionUncertaintyFirm heterogeneity
Abstract
Most existing literature examining the links between firm heterogeneity and entry into exporting assumes that firms are risk neutral. In this study, we relax this strict assumption that firms are risk neutral and introduce different attitudes of firms toward risk as an additional source of firm heterogeneity. In particular, we examine how risk attitude changes the effect of uncertainty on the decision of a firm to export considering the different types of uncertainty faced by the firm, namely, firm-specific and macroeconomic. Our analysis yields two interesting findings. First, firm-specific uncertainty discourages risk-averse firms from participating in foreign markets more than risk-taking firms. One possible explanation for this finding is that risk-averse firms are more cautious in export market participation when firm-specific uncertainty increases. Second, we find that riskaverse firms are less likely to decrease their export market participation when responding to macroeconomic uncertainty. Thus, risk-averse firms are more likely to diversify their domestic risk by participating in foreign markets in responding to macroeconomic uncertainty.
ISSN
1225-0279
Language
English
URI
https://hdl.handle.net/10371/97047
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of Economics (SJE)Seoul Journal of Economics vol.29 no.1~4 (2016)
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