How Exporters Grow.

This article investigates the post-entry dynamics of Irish exporting firms using customs data, focusing on how firms accumulate customer base after entering new export markets. It contrasts two theories: one where firms build customer base primarily through marketing and advertising efforts, and another where firms use dynamic pricing (mark-up adjustments) to attract customers over time. Empirical analysis shows that export quantities grow significantly after market entry while mark-ups remain flat, suggesting that firms rely on marketing and advertising rather than intertemporal mark-up distortions to expand their customer base. A structurally estimated model confirms that customer base accumulation is insensitive to lagged sales and is driven by marketing and advertising investment, with estimated selling expenses consistent with external data. The model also explains observed export responses to tariff changes, including larger long-run elasticities compared to short-run ones and elasticities that increase with the persistence of tariff shocks, aligning with empirical macroeconomic evidence.