Networks and the Dynamics of Firms' Export Portfolio : Evidence for Mexico

We use network analysis tools to identify communities in the web of exporters' destinations. Our network‐based community measure is purely outcome based, it captures multilateral rather than bilateral dependence across countries, and it can be calculated at the industry level. Next, we use our network‐based community measure as predictor of additional countries chosen by firms expanding their export destination portfolio. Using data on Mexican new exporters, the probability of choosing a new export destination doubles if it belongs to the same community of any of the firm's previous destinations. The introduction of the network‐based community variable improves the accuracy of the model up to 19 per cent relative to a model that only includes gravity variables. Industry‐specific communities and general communities play similar roles in determining the dynamics of Mexican exporters' country portfolio