Distance from core competences and new export survival: Evidence from multi-product exporters

We study the determinants of the survival of new export products of multi-product firms. We use micro-level data from Chile to estimate linear fixed-effects and non-linear survival models to show that a measure of “distance” between a firm's new export and its previous export basket is a negative and significant determinant of the survival of the new export, especially during its first year. Our interpretation of this finding is that exports further away from firms’ core competences have lower chances of survival in exports since it is more difficult for firms to achieve competitiveness in them. Our results suggest that country-level diversification, at least through existing firms, should be gradual.