Domestic Firms, Exporters and Importers: A Systemic Perspective

Based on the exponentially growing literature in recent years on international trade and firm performance, this paper develops a general theory for this area based on systemic logic and game theory. After developing two theorems on the dynamics of the domestic market, we direct our attention to establishing results on exports to either less developed or advanced markets. Finally, a general theory is formulated regarding international trade (exports and imports) that includes selected indices of firm performance (productivity, profitability, wages, and survival). In addition to confirming empirical findings in the literature, we also delineate some suggestions for future research. This paper introduces systemic thinking into the study of international trade that is expected to provide a much needed framework for public debates and policy decision making.