Firm-level heterogeneity and the decision to export : a real option approach

In "new" new international trade theory, whether firms export or not are determined by their productivity. These models assume that firms enter a market to find their productivity levels revealed to them as in a lottery. In this paper we propose an alternative way to model whether firms export or not, namely as a firm-level decision akin to an investment decision with a real option value. We show that endogenizing the export decision is consistent with patterns of productivity and exporting reported in the empirical literature. -- international new ventures ; firm-level heterogeneity ; start-ups ; stochastic dynamic programming ; trade ; exports ; productivity ; real option theory ; investment ; firms ; international entrepreneurship