Author ORCID Identifier

Catherine Co

Document Type

Article

Publication Date

8-31-2019

Publication Title

The World Economy

Abstract

This paper contributes to the home (market) bias literature where administrative or political borders limit trade across borders. Home bias is well documented at the national and subnational level. To sort out macro (e.g., location characteristics) and micro (e.g., enterprise characteristics) factors behind home bias, we use small and medium‐sized enterprise (SME) data from Vietnam. Using the fractional multinomial logit model, we find that the proportion of SME sales outside of their home markets is positively associated with enterprise size, age, number of business association memberships and the distance of SMEs' most important supplier. In contrast, the proportion of SME sales to neighbouring provinces is negatively associated with the share of SME production for final consumption. Besides enterprise‐level frictions, market characteristics matter too. The proportion of SME sales to customers in their home markets is negatively associated with home or neighbouring provinces' governance quality, while the proportion of sales to customers in neighbouring provinces is positively associated with these areas' governance quality. These suggest that good governance frees SME resources for use in selling to less familiar markets.

Comments

© 2019 The Authors. The World Economy published by John Wiley & Sons Ltd

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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Funded by the University of Nebraska at Omaha Open Access Fund