On the role of vertical differentiation in enhancing survival of export flows: Evidence from a developing country

This paper analyzes the role of vertical differentiation linked with global production networks in increasing the chance of export survival using highly disaggregated machinery exports data from Turkey for the 1998-2013 period. Results obtained from descriptive statistics analysis suggest that duration of Turkey’s machinery exports is remarkably short with the median duration of merely one year. In addition, the likelihood of the survival of exports widely varies across product types (total machinery products, finished machinery products and machinery parts and components) and across trade types (horizontally differentiated products and vertically differentiated products). Based on discrete-time duration models, the empirical results demonstrate that vertical differentiation as well as product and market diversification are associated with a higher export survival rate, particularly for parts and components linked with global production networks. The evidence hence supports the hypothesis that global production sharing activities greatly increases the chances of survival in export markets.