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Export Destination and Firm Performance: The Case of Ecuador and the United States

Abstract:

The evidence regarding the effects of trade on the performance of firms varies depending on different factors, such as the industry, the firm’s size, the trading partner, and others. In Latin America, various studies have proven the benefits of trading. However, the impacts of the trade relations with the United States have been scarcely studied by Latin American countries. We contribute to the literature studying how trade between Ecuador and the United States impact the performance of Ecuadorian firm. We use data from Superintendencia de Compañías, Valores y Seguro (SCVS) and from Ministerio de Producción, Comercio Exterior, Inversiones y Pesca (MPCEIP) to evaluate the performance of firms that export to the US compared to those that export to other countries. We employ different empirical strategies and leverage computational tools of data analysis to assess the relationship. We use panel data with fixed effects and lagged covariates to mitigate a possible reverse causality and omitted variable bias. Our findings highlight a positive significant impact across three measures of performance, return on assets, employment, and sales. This study contributes valuable insights for policymakers and stakeholders interested in trade relationships, especially with the USA. We also demonstrate how technological tools used in data analysis can be essential for shedding light on economic development.