(2003), which shows how the fixed costs generate a self-selection of the most efficient
firms into foreign markets. This productivity dynamics is consistent with the findings of
Clerides, Lach and Tybout (1998) that have shown, for Colombia, Mexico and Morocco,
how the productivity trajectories of exporters were higher that those of non-exporters
already before starting exporting and they did not change thereafter. However on
empirical grounds the possibility that firms benefit from the contact with foreign
counterparts has not been ruled out. There are still studies presenting empirical evidence
of a learning-by-exporting effect on performance which materialize after breaking into
foreign markets (e.g. Kraay (1999), Van Biesenbroek (2003), De Loecker (2004) and
Girma, Greenaway and Kneller, (2004)).
Hence, the rich debate on the relationship between firm performance and international
trade is still open.
Such firm level literature, mostly focused on exports (and foreign direct investment).
Much less effort has been devoted to the export counterpart, imports. However, as
pointed out by Ethier (1982) and highlighted by Kraay, Soloaga and Tybout (2001),
there are strict complementarities between international activities of individual
producers. Therefore “studies that focus on one international activity at a time may
generate misleading conclusions” (Kraay et al, 2001, p.1).
Furthermore, not only export have a linkage with firm’s performance but also imports
can be related to productivity. In fact, imported materials can be a source of learning6
and as Ethier (1982) noted, it can also be a way of expanding the menu of intermediate
inputs available to domestic firms and favor the best match between input mix and
desired technology or product characteristics. Hence at the firm level, we can consider
the generic “crossing the border” choice as driven both upstream and downstream by the
firm’s profit maximization. In fact the firm chooses the most efficient inputs’ source to
minimize total costs in the production of an output that has to find its demand
domestically or abroad
Therefore our work contributes to the empirical analysis by examining, for a sample of
Indian manufacturing plants, the linkage between import participation and exporting
channels in the foreign country and conform to all the shipping rules specified by the foreign customs
agency (Melitz 2003 and Roberts and Tybout 1997)
6 Only few papers have looked at the potential role of imports as a learning mechanism and at its impact
on firm’s performance: Macgarvie (2003) for French firms, Keller and Yeaple (2003) for US
multinationals and Blalock and Veloso (2004) for Indonesia.