Abstract
While the influence of import competition on the decline of the manufacturing industry in the United States receives much attention in both the general press and academic literature, recent studies suggest that some firms are successful in establishing themselves domestically and immediately enter the export market. This paper investigates the financial structure decisions of these newly founded exporters by utilizing recent firm-level data from the Kauffman Firm Survey, which is a panel of firms founded in the United States during 2004. The results indicate a notable difference in both the scale and composition of the financial resources of exporters as compared to non-exporting firms. In particular, a statistically significant relationship between later stage funding via external equity and a firm’s export participation and intensity is found. This paper explores the relationship between the financial structure of new manufacturing firms and their exporting behavior. The period immediately following a firm’s establishment is commonly marked by extremely scarce financial resources. Thus, the already difficult task of overseas expansion may be compounded by the financial state of new firms that face limited equity and credit sources. Of the existing literature concerning the exporting behavior of new firms, the focus is typically on non-financial strategic behavior. This paper extends the literature by empirically examining the relationship between the financial structures of new firms and their exporting behavior. In this paper, confidential data from the Kauffman Firm Survey (KFS) are used that provide financial and other firm-level characteristics on newly formed U.S. manufacturing firms. The information from these panel data provides an examination of the magnitude of new financial resources, as well as the timing of such funding and its sources. Results suggest that exporting firms are much larger in terms of their financial resources. Further, firms that receive new equity funding during their early years are much more likely to be exporters. Differences in the composition of funds between exporters and non-exporters are also reported.act Body]