Market entry and economic diplomacy

Abstract

This article analyses the role of economic diplomacy on the export market entry decisions of Dutch firms. We show that the presence of government support offices in middle-income countries and government trade missions stimulate Dutch firms to enter export markets in these countries. These conclusions follow from using detailed international trade data combined with firm and export market characteristics.

Keywords:

• market entry
• economic diplomacy
• heterogeneous firms

JEL Classification:

• F10
• D22
• F13

Acknowledgements

We thank Fred Kuijpers (CPB) and Harry Habets (Statistics Netherlands) for their assistance and help to match the datasets and Frank van Leeuwen (EVD) and Selwyn Moons (Ministry of Economic Affairs) for providing data on economic diplomacy, and the participants at the FREIT conference in Ljubljana for providing helpful suggestions.

Notes

¹ Creusen and Lejour (2011) discuss the construction of this matched dataset in more detail.

² The NBSOs provide similar activities as the embassies and consulates, but they have no formal diplomatic status (see also http://www.evd.nl). In the remainder, we label them all as trade posts.

³ These coefficients are available on request.

⁴ We do not consider low-income countries because they do not belong to the Dutch top 50 of export destinations.